Reserves hold amid Middle East woes: BoN

The Bank of Namibia (BoN) says it expects its stock of international reserves to remain above the 3-month import cover threshold despite ongoing tensions in the Middle East, which has seen an increase in the oil price.

Addressing the media following the announcement of the repo rate, which the central bank elected to keep unchanged, central bank governor Ebson Uanguta acknowledged the impact the oil price increase was having on its stock of international reserves, but was confident it would hold steady. The threshold was introduced to maintain the one-to-one currency peg between the Namibian Dollar and its anchor currency, the South African Rand.

Ongoing tensions in the Gulf stem from the February 2026 military conflict between Iran and a US-Israel coalition. Escalation has disrupted shipping through the Strait of Hormuz, a chokepoint for about one-fifth of global oil supply, driving a sharp rise in international oil prices and raising fuel import costs for Namibia.

"Looking at the numbers, we believe reserves will manage to hold, at least above the three-months of import cover, but again, if this crisis persists for longer than say six-months, definitely our reserves will come down but I do not believe it will come below the threshold," Uanguta said.

Uanguta grounded his confidence in the performance of the mining sector, which he said was showing signs of resilience.

"Exports are growing, particularly when you look at the mining sector, uranium… that helps in a way to hold onto the reserves we have."

The stock of international reserves stood at N$51.8 billion at the end of March 2026, a slight decline compared to N$51.9 billion at the end of January 2026.

"At this level, foreign reserves translate to an estimated import cover of 3.2 months, which is sufficient to support the currency peg and meet the country's international financial obligations," he said.

Rate holds steady

On the repo rate decision, Uanguta said the MPC had been unanimous.

"Following extensive deliberations, the MPC unanimously decided to maintain the repo rate at 6.5%.

"In determining the appropriate monetary policy stance, the MPC noted weak domestic economic activity and credit extension, amidst a higher inflation forecast for 2026. The Committee further noted the escalation of geopolitical tensions in the Middle East, mindful of uncertainties regarding the duration of the war and the intensity of the spillover effects thereof," Uanguta said.

"While maintaining a cautious stance, the MPC further noted recent policy measures to insulate the domestic economy from the energy-price shock, which could moderate the inflation outlook over the short term," he added.

Namibia's external position deteriorated in the period since the February 2026 MPC meeting.

"Despite the 7.5% growth in export earnings, the merchandise trade deficit widened by 9%, year-on-year, to approximately N$9 billion during the first quarter of 2026, due to a faster increase in import payments. Going forward, the cost of imported fuel, fertiliser and other downstream products from the petroleum industry is set to further increase in the coming months," Uanguta said.

The BoN's next MPC meeting will be held on 15 and 16 June 2026, with the repo rate decision to be announced on 17 June.