Borrowing money more expensive

PHILLEPUS UUSIKUThe increase in the repo rate by the Bank of Namibia (BoN) from its historic low level of 3.75% to 4.00% will lead to an increase in the prime lending rates for local commercial banks from 7.50% to 7.75%Therefore, households will have to pay relatively more on home and vehicle loans, analysis by Simonis Storm indicated.The decision to increase the repo rate was taken following a review of the global, regional and domestic economic as well as financial developments. The monetary policy committee (MPC) of the central bank is of the view that the rate is appropriate to safeguard the one-to-one link between the Namibia dollar and the South African rand. Moreover, this monetary policy stance is also a step towards normalising the current negative real interest rate environment and establishing a positive real interest rate that is conducive to long-term economic growth. Speaking at the announcement, Johannnes !Gawaxab, governor of the BoN, noted that overall domestic economic activity recovered in 2021 compared to 2020. The increase in economic activity was observed in major sectors such as mining, wholesale and retail trade, communication and tourism. On the contrary, activity in the construction, manufacturing and transport sectors as well as the number of cattle marketed slowed over the same period, he added.Going forward, the domestic economy is expected to grow around 3% in 2022. Risks to the domestic economic outlook in the medium term remain sudden surges in Covid-19 cases and vaccine hesitancy, he noted.CREDIT UPTAKEGrowth in private sector credit extension (PSCE) declined to an average of 2.4% in 2021, lower than the 3.5% registered in 2020. The slowdown in PSCE was due to lower demand for credit by both businesses and households, as a result of slow domestic economic activity during the review period. Since the last MPC meeting, year-on-year growth in PSCE slowed to 1.2% in December 2021, from 2.9% registered in October 2021, !Gawaxab said.As at 31 January 2022, the preliminary stock of international reserves stood at N$42.9 billion compared to N$43.9 billion at the end of December 2021. The decline in international reserves was partly due to foreign payments by government, commercial bank outflows and the appreciation of the Namibia dollar during the period. At this level, international reserves are estimated to cover 5.8 months of imports and hence remain adequate to protect the peg of the Namibia Dollar to the South African rand as well as meet the country's international financial obligations. “Year to date, there was an outflow of N$7 billion,” !Gawaxab pointed out.-phillep@nmh.com.na

Borrowing money more expensive

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Republikein 2025-04-30

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Borrowing money more expensive

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