Bank of Namibia adjusts repo rate downwards
The Bank of Namibia (BoN) has lowered its repo rate by 25 basis points this week, citing the need to maintain the currency peg with South Africa and address a widening trade deficit. The decision aims to balance these factors while navigating global economic uncertainties.
BoN Governor Johannes !Gawaxab emphasized the importance of maintaining a close policy rate differential with South Africa, Namibia's anchor country. The reduction seeks to narrow this gap over the medium term. The central bank is also aware of the increasing trade deficit and the impact of upcoming international debt repayments on Namibia's international reserves. Furthermore, heightened global policy uncertainty played a role in the decision.
"The MPC remains cognisant of the margin between policy rates in Namibia and the anchor country, South Africa, and will aim to narrow the policy rate differential over the medium term," !Gawaxab said. "The committee is also mindful of the widening of the trade deficit, the impact of the imminent settling of international debt obligations on the country’s international reserve holdings as well as the increased level of global policy uncertainty.”
Inflation in Namibia averaged 4.2% in 2024, down from 5.9% in 2023, primarily due to lower food and transport costs. However, !Gawaxab noted a slight uptick in inflation to 3.2% in January 2025, from 3% in October 2024, driven by rising prices in the same categories.
Looking forward, the BoN projects inflation to average 4% in 2025 and 4.4% in 2026. "The 2026 forecast is slightly higher than previously projected, partly attributed to a marginally weaker exchange rate assumption. The central bank will continue to monitor these economic indicators and adjust monetary policy as needed," !Gawaxab said.
BoN Governor Johannes !Gawaxab emphasized the importance of maintaining a close policy rate differential with South Africa, Namibia's anchor country. The reduction seeks to narrow this gap over the medium term. The central bank is also aware of the increasing trade deficit and the impact of upcoming international debt repayments on Namibia's international reserves. Furthermore, heightened global policy uncertainty played a role in the decision.
"The MPC remains cognisant of the margin between policy rates in Namibia and the anchor country, South Africa, and will aim to narrow the policy rate differential over the medium term," !Gawaxab said. "The committee is also mindful of the widening of the trade deficit, the impact of the imminent settling of international debt obligations on the country’s international reserve holdings as well as the increased level of global policy uncertainty.”
Inflation in Namibia averaged 4.2% in 2024, down from 5.9% in 2023, primarily due to lower food and transport costs. However, !Gawaxab noted a slight uptick in inflation to 3.2% in January 2025, from 3% in October 2024, driven by rising prices in the same categories.
Looking forward, the BoN projects inflation to average 4% in 2025 and 4.4% in 2026. "The 2026 forecast is slightly higher than previously projected, partly attributed to a marginally weaker exchange rate assumption. The central bank will continue to monitor these economic indicators and adjust monetary policy as needed," !Gawaxab said.
