Windhoek:The Bank of Namibia (BoN) has announced an increase in the repo rate by 25 basis points, bringing it to 7.00%. This adjustment has consequently raised the prime lending rate to 10.50% as inflation experienced a rise to 5.4% in September, up from 4.4% in June.
According to NAMPA, the decision was made unanimously by the Monetary Policy Committee (MPC) during its fifth meeting of the year, held on 26 and 27 October 2026. BoN Governor Ebson Uanguta revealed this information on Wednesday, highlighting that the increase is aimed at maintaining the one-to-one link between the Namibia Dollar and the South African Rand, and mitigating the impact of rising fuel prices.
The central bank outlined the necessity of narrowing the interest rate gap with South Africa to prevent potential capital outflows and to safeguard reserves. Transport costs have been a significant factor in driving inflation, which averaged 3.8% for the first nine months of the year, compared to 3.6% the previous year. The BoN has adjusted its inflation forecast to 4.2% for 2026, slightly up from its previous estimate, and anticipates 4.0% for 2027.
Brent crude oil prices have surged to approximately US$116 per barrel, marking the highest level in over six months, which poses challenges for domestic inflation and contributes to a wider trade deficit. The deficit expanded to N$33.5 billion in the first eight months of the year, up from N$17.8 billion, largely due to increased imports of mineral fuels.
Despite these challenges, the economy is expected to grow by 2.1% this year and 2.8% in 2027, an improvement from 1.7% in 2025. However, the ongoing Foot and Mouth Disease outbreak continues to exert pressure on economic growth. Foreign reserves increased to N$59.3 billion by the end of September, up from N$58.0 billion in July, providing 3.6 months of import cover, which is deemed adequate to sustain the currency peg.
Private sector credit growth also showed an uptick, reaching 5.4% in August from 4.5% in June. The next MPC meeting is scheduled for 07 and 08 December 2026.