Forex reserves decline to N$28.8 billion in December
The level of international reserves declined to N$28.8 billion at the end of December from N$29.7 billion recorded in the month of November 2019, according to the Bank of Namibia.
The decline was mainly due to the net purchases of the South African rand by commercial banks for import payments, coupled with government foreign payments.
Further analysis by PSG Konsult shows that the level of forex reserves decreased sharply in the second half of 2019 due to a slump in the prices of Namibia’s key export commodities and the increased need for food and electricity imports, owing to severe drought.
“Although South African Customs Union Sacu revenue increased slightly in local currency terms in 2019 it actually declined in US dollar terms due to weakness in the Namibian dollar Nevertheless, the estimated import cover of goods and services stood at 4.3 months at the end of the third quarter of 2019 which is above the benchmark of three months and sufficient to maintain the one to one exchange rate with the rand,” Shelly Louw, Research Analyst at PSG explained.
Moreover, the central bank reported that broad money supply growth decelerated slightly to 10.5 in December 2019 from 10.6 in the previous month, mainly from a contraction in the net foreign assets of depository corporations and is in line with weak domestic activity.