Windhoek: The Bank of Namibia (BoN) is expected to keep its repo rate unchanged at 6.75 per cent when it meets on 13 August 2025, a report issued on Tuesday by FNB has suggested.
According to Namibia Press Agency, FNB economist Helena Mboti stated that the decision would mark the third consecutive hold as the central bank navigates external risks, weak household credit growth, and a narrowing interest rate gap with South Africa. Mboti highlighted that external vulnerabilities and persistent domestic inflation since the last Monetary Policy Committee (MPC) meeting continue to influence the policy decision.
The South African Reserve Bank (SARB) recently cut its policy rate by 25 basis points to 7.00 per cent on 31 July, narrowing the gap with Namibia to 25 basis points. Mboti said the move was anticipated and does not alter FNB's expectation that the BoN will maintain the repo rate for the remainder of the year.
Private sector credit grew by 5.7 per cent year-on-year in June, an increase from 1.8 per cent a year earlier. Corporate demand, particularly from the mining and manufacturing sectors, rose by 10.6 per cent, while household credit growth remained slower at 2.4 per cent. Mboti noted that while the slow pace of household borrowing could support the case for monetary easing, other considerations are more pressing.
The BoN's latest Financial Stability Report revealed that large corporate exposure grew by 32.7 per cent year-on-year in 2024, compared to overall private credit growth of 4.0 per cent. Mboti indicated that the economic recovery is being driven largely by large-scale corporate activity, which has limited direct employment impact.
To support households and small businesses without altering the repo rate, the BoN has encouraged commercial banks to align their lending margins with other Common Monetary Area countries. This move is expected to reduce borrowing costs by 25 basis points before the end of the year.
Mboti also warned of potential pressure on external reserves in the second half of 2025 due to Eurobond repayments and renewed oil exploration in the Orange Basin. She reported that reserves stood at 3.9 months when excluding exploration-related outflows. Additionally, a sharper rate-cutting cycle by the SARB or unexpected global price shocks could prompt the BoN to adjust rates earlier than currently planned.