Repo rate maintained at 3.75%
The Bank of Namibia has kept the repo rate unchanged at 3.75% to support domestic economic activity that is still being weighed down by the COVID-19 pandemic, Governor Johannes Gawaxab announced today.
Gawaxab the bank’s monetary policy committee (MPC) deems the repo rate level of 3.75% appropriate to safeguard the one-to-one link between the Namibia Dollar and the South African Rand.
“This decision was taken following a review of global, regional and domestic economic and financial developments. It was noted that higher inflation is increasingly posing a risk to the sustainability of the current level of the repo rate, a situation which is closely monitored by the MPC. In the meantime, the MPC is of the view that at 3.75%, the repo rate remains appropriate to continue supporting the weak domestic economy, while at the same time safeguarding the one-to-one link between the Namibia Dollar and the South African Rand,” he added.
Gawaxab said the successful procurement, expeditious rollout as well as large-scale uptake of COVID-19 vaccines remain key to the extent and speed of the economic recovery.
“Domestic economic activity remained subdued during the first half of 2021, mainly reflected in a slowdown in the tourism, mining, agriculture, manufacturing, construction, as well as the transport and storage sectors,” he said.
Since the last monetary policy meeting in June, activity in the wholesale and retail trade sector increased, while activity in the local electricity generation sub-sector declined.
“Going forward, the domestic economy is expected to grow by 1.4% in 2021. Risks to the domestic economic outlook remain and include: surges in COVID-19 cases with concomitant disruptions to economic activity as a result of COVID-19 restrictions,” Gawaxab said.
Meanwhile, as at 31 July 2021, the stock of international reserves stood at N$42.7 billion compared to N$39 billion reported in the previous MPC statement. The increase in reserves was mainly attributed to the quarterly SACU revenue received early July 2021. The international reserves at the above level were estimated to cover 6.4 months of imports.
“At this level, Namibia’s international reserves remain sufficient to protect the peg of the Namibia Dollar to the South African Rand, while meeting the country’s international financial obligations,” Gawaxab said.