Loans to Private Sector Remain Unchanged

PRIVATE sector credit extension growth remained unchanged in September at 16,3% year on year.

IJG said the growth was driven by g uptake in credit to businesses, which expanded by 20,2% year on year, while credit extension to individuals saw lesser growth of 12,9% year on year.

Outstanding mortgage loans grew by 12,1%, while instalment credit growth remained abnormally g, at 18,6%.

“Following a year of abnormally high growth, the total level of outstanding private sector credit extension is now N$65,6 billion, N$9,24 billion more than a year ago,” IJG Securities said.

THORN

Private Sector Credit Extension growth remains driven by instalment credit, a persistent thorn in the side of the Monetary Policy Committee of the Bank of Namibia.

IJG said the reason behind this concern is that many of the goods sold on instalment periods are imported from outside the country, which importation puts pressure on the country’s balance of payments.

“Nevertheless, instalment credit represents a relatively small, but growing, portion of total credit,” the firm said.

On a rolling 12-month basis, net credit extension increased to a record N$9,24 billion, from the previous month’s record of N$9,11 billion. This major increase comes about on account of historically low interest rates until mid-2014, followed by two minor 25 basis points increases.

IJG said this coupled with abnormally g growth in the local economy, major fiscal expansion, declining unemployment and major increases in cash wages being paid in the construction sector, is likely to have resulted in major increases in disposable income in Namibia over the past 24 months.

“Given a low marginal propensity to save in the country, much of this increased income is spent, and often leveraged upon through the local commercial banks,” IJG said.

Government’s domestic debt increased from N$20,25 billion to N$20,54 billion between September and October, largely on account of new bonds.

IJG further said the construction sector is likely to have resulted in major increases in disposable income in Namibia over the past 24 months.

IJG said on the back of major increases in government expenditure over the past year, as well as a concerted effort to house smaller cash balances with the commercial and central banks, in September, government’s deposits with these banks fell to the lowest level seen since December 2006.

Foreign reserve levels recovered through September, to N$16,5 billion, from N$13,7 billion the preceding month.

Source : The Namibian