The Bank of Namibia (BoN) has increased the repo rate to 4.25 per cent, citing it as appropriate to safeguard the one-to-one link between the Namibia Dollar and the South African Rand.

This was decided during the BoN’s Monetary Policy Committee’s (MPC) bi-monthly meeting on Tuesday following a review of the global, regional and domestic economy, as well as financial developments, mindful of the need to counter the build-up of inflationary pressures in the economy.

BoN’s Governor Johannes !Gawaxab in a media release on Wednesday said domestic inflationary pressures are building up, with inflation averaged at 4.5 per cent during the first two months of 2022, compared to 2.7 per cent in the corresponding period of 2021.

He said the rise in inflation was mainly driven by an increase in transport inflation, on account of a rise in international oil prices.

“On a monthly basis, however, overall inflation declined marginally to 4.5 per cent in February 2022 from 4.6 per cent in January 2022. The monthly decline was attributed to lower inflation for transport and food, while housing inflation remained unchanged,” he said.

Additionally, from 3.6 per cent registered in 2021, Namibia’s overall inflation is now projected to average around 6.0 per cent for 2022, from the 4.4 per cent projected at the last MPC meeting.

!Gawaxab noted that although overall inflation remains within a reasonable range, its food and transport components are expected to remain elevated and continue to have a disproportionate effect on the low-income segment of the society, and therefore requires close monitoring.

“Namibia’s real GDP rebounded to 2.4 per cent in 2021 compared to a contraction of 7.9 per cent in 2020. The increase in output was mainly attributed to a recovery in the production of diamonds and uranium, wholesale and retail trade, hotels and restaurants and transport sectors coupled with the significantly positive growth registered in other mining and quarrying,” he further said.

The domestic economy, according to the governor, is expected to grow by around 3.0 per cent in 2022. Risks to the domestic economic outlook in the medium term however continue to be dominated by geopolitical tension between Russia and Ukraine and higher oil and food prices, among others.

Source: The Namibian Press Agency