BoN wary of increasing trade deficit
The Governor of the Bank of Namibia has expressed concern at the ever widening trade deficit between Namibia and its trading partners.
Governor Ipumbu Shiimi said Wednesday that the continued widening of the trade deficit warrants monitoring as it may further affect the level of international reserves.
Shiimi said although current reserves as at the end of May, are enough to cover three months of export cover as well as meeting the country’s other international obligations, there was need to investigate the items that are being imported into the country with a view to taking corrective measures if the imported products are not going into productive sectors.
Shiimi said this when he announced the central bank’s decision to leave the repo rate at 5.50%.
He said: “Once you get to the bottom of that, you then decide on the targeted policy measures …at the moment I will be speculating [what those measures will be.”
He said the measures to be taken will depend on the findings, and that any decision that will be taken, if there is a need, will be a collective effort between government agencies.
“It may not only be the Bank of Namibia. Infact this is a national issue and therefore it has to be looked at at a national level and the policy measures that Namibia is likely to take, if that is the concern, is going to be a national policy. At the moment I will not be able to point out what exactly is Namibia going to do.”
He, however, briefed the Economist on some of the possible measures that can be implemented in the case that the country is importing unproductive goods.
He said: “You have to see if it is, for instance, motor vehicles, or it is perhaps things like electronic equipment or things like that and how they are financed. If they are financed on credit, for instance, do you want to take specific measures to reduce the attractiveness of credit on those particular items. That is one example or is it something that the minister of finance can consider a higher tax or something like that.
“So there are various measures that one can take but one needs to understand first what is the nature of the problem if indeed there is a problem because as I have said, we are also of the view that currently we have big mining projects like Husab taking place. Many of those goods seem to be destined for the construction of those mines, and if that is the case then we are not concerned because soon Husab will start to produce and sell outside and therefore the country will earn foreign exchange.”
The governor also expressed concern at the lower metal prices currently prevailing because of weak global economic conditions since proceeds from metal sells constitute a big percentage of Namibia export earnings.
“The implication [of lower metal prices] of course is that export earnings will be reduced, but I think what is also pleasing is that although we see this decline, we should acknowledge that metal prices were very high and maybe they are only coming to the normal levels and therefore our mines should be able to survive with those normal level prices.
“What is also helping is the exchange rate that has weakened a bit and I think that has also provided a level of cushion to our mining producers,” Shiimi said.