The Bank of Namibia (BoN) on Wednesday announced an increase of the repo rate by 50 basis points from 4.25 to 4.75 basis points.

Announcing the increase BoN Governor Johannes !Gawaxab said the decision was taken in consideration of the elevated global and domestic inflationary pressures, the fragile economic recovery and the need to safeguard the one-to-one link between the Namibian Dollar and the South African Rand while meeting the country’s financial obligations.

“This monetary policy stance is necessary to narrow the current negative real policy interest rate that is conducive to long-term economic growth. The policy direction is consistent with developments elsewhere in the world and in the region, where policymakers are acting to prevent the current acceleration in inflation from becoming a continuous inflation spiral,” he said.

!Gawaxab added that the BoN will continue to monitor global developments and their potential effects on the domestic economy.

He explained that Namibia could not afford to keep the repo rate at 4.25 basis points after South Africa (SA) had raised its repo rate in May to 4.75 basis points, a situation that would have seen investors ditching Namibia to invest in SA because of better returns.

He further explained that since April 2022 when the Monetary Policy Committee (MPC) last met, commodity prices have continued to increase on an annual basis.

Inflation pressure, the war in Russia and Ukraine, Covid-19 lockdowns in China, and the performance of global equity markets globally were some of the main contributing factors to the repo rate hike.

His announcement did not come as a surprise as local economists had predicted the increase, noting that Namibia could not afford to leave the repo rate unchanged.

The MPC of BoN met on 13 and 14 of June and decided to hike the repo rate from 4.25 to 4.75 basis points.

The next MPC meeting is scheduled for 15 and 16 August 2022.

Source: The Namibian Press Agency