Local economists have predicted that the Bank of Namibia (BoN) will increase the repo rate during the July Monetary Policy Announcement (MPA) on Wednesday.

In a media release to Nampa on Tuesday, High Economic Intelligence (HEI) researchers say the BoN Monetary Policy Committee (MPC) is likely to increase the repo rate by 50 basis points from 4.25 per cent to 4.75 per cent on Wednesday.

“The rate increase is appropriate to safeguard the one-to-one link between the Namibia Dollar and the South African Rand while meeting the country’s international financial obligations,” the statement suggested.

In following the trend, Namibia will follow suit and increase its repo rate by 50 basis points, mirroring the South African Reserve Bank which increased its repo rate by 50 basis points in its last meeting held in May 2022.

At that time the South African Reserve Bank said the increase in the repo rate was necessary in safeguarding the inflation target policy.

Namibia has been experiencing negative real interest rates since October 2021 due to the annual inflation rate outstripping the repo rate.

“Inflation has been hovering above 4 per cent and reached 5.6 per cent in April 2022 and an increase of the repo rate by 50 basis points will protect the currency peg. We are in an interest hike cycle in the short to medium-term. This is augmented by high inflation rates which are expected to remain elevated as a result of the continuous external cost-push factors,” the HEI statement read.

Senior Lecturer in the Economics Department at the University of Namibia, Dr Omu Kakujaha-Matundu concurred with the HEI researchers saying there will definitely be an increase, but it may be between 25-50 basis points.

“Inflation is surging upwards, while the war between Russia and Ukraine is affecting imports. The rand’s performance against the United States Dollar also plays a role in the inflation rate,” he said.

First National Bank Group Economist, Ruusa Nandago said the increase could be 50 basis points or more as Namibia’s repo rate needs to be at least equal (as it currently stands) to or more than that of South Africa to retain investors.

“For ordinary Namibians, this means that they will have to fork out more for their loans, putting a squeeze on the consumer income. For those with investments or savings, they will earn more because of the higher interest rate,” she said.

The MPC increased the repo rate by 25 basis points from 4.0 per cent to 4.25 per cent in their last meeting in April 2022.

Source: The Namibian Press Agency