Africa-Press – Namibia. BANK of Namibia officials will conclude their monetary policy meeting today, to decide the interest rates to be charged until mid-April.
Analysts are, however, already hinting that the benchmark interest rate will be increased to 7% come tomorrow.
Late last year, the central bank hiked the rate to 6,75%, pushing the prime lending rate to 10,5%.
This means on average all loans now cost over 10,5% in interest, and if it so happens that an increase is announced, the prime lending rate will be close to 11% soon.
Tomorrow, governor Johannes !Gawaxab or one of his deputies will announce the new rate – and analysts are of the view a hiking path will be taken to match the recent South African increase in January.
Last month, South African Reserve Bank governor Lesetja Kganyago announced a 50 basis points increase, which now sees South Africa’s repo rate at 7,25% and the prime lending rate at 10,75%.
For him, the year commenced with high inflation and weak economic growth which are continuing to shape global conditions, and necessitated a hike in interest rates.
Inflation in South Africa was reported to have eased to 7,1% in December, and 6,9% for Namibia.
Namibia is now 50 basis points behind South Africa at 6,75% and will announce the decision of price stability on 15 February 2023.
Economist Omu Kakujaha-Matundu said he is expecting slightly better news for Namibians than what hit South Africans in January.
“My thinking is that the Bank of Namibia will raise the repo by 25 basis points or a quarter of a percent. That will push the repo to 7%, slightly lower than the South African repo, leaving Namibian consumers and businesses in a slightly better position than their South Africans counterparts,” he said.
Arysteq Asset Management managing director Purvance Heuer said Namibia is way behind the curve, and a 25 basis points will be sensible.
Considering that inflation in Namibia has been dropping, analysts are of the view that despite the local conditions being favourable to an extent, a hike in the repo rate would be affected to maintain the one-to-one peg between the Namibia dollar and the rand.
Recent private sector credit extension data as released by the Bank of Namibia shows that loans extended for economic activity remain low, mostly due to high interest rates.
Analysts at Simonis Storm said banks will only improve their lending when convinced that higher economic growth rates can be sustained in the medium term.
“We could see more loan applications being accepted and so support higher credit and economic growth,” Simonis Storm said.
Last year, the central bank had projected that the local economy would grow by 2,7%, and it is not clear at what growth rate commercial banks would respond positively to see inflation slowing down.
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