Central bank gives ‘keDezemba’ relief

NAMIBIANS have been provided some festive season relief from the Bank of Namibia (BoN), since it decided to cut the repo rate to 7% yesterday.

This will see people paying less on their loans as the prime rate falls to 10.75%.

The prime lending rate affects the interest commercial banks charge their customers on loans.

Central bank governor Johannes !Gawaxab yesterday said this decision was unanimous.

“To continue supporting the domestic economy while safeguarding the Namibia dollar to the South African rand, the monetary policy committee unanimously decided to reduce the policy rate by 25 basis points,” he said.

!Gawaxab said economic activity continued to grow in the first 10 months of the year, although there has been a decline in the diamond and crop production subsectors.

“The growth was driven by the mining, electricity generation, wholesale and retail trade, tourism, communication and transport sectors, and the livestock marketing subsector,” the governor said.

However, the country’s trade deficit has continued to widen.

Economist Josef Sheehama says the interest rate cut will provide relief for the holiday season.

“The interest rate reduction may provide some respite for consumers as the holiday season draws near, especially those who are dealing with large debt loads,” he says.

However, prudence must be exercised on how money is spent during this season, Sheehama says.

He says the decrease will not be felt by those in low-income households, but “is a step in the right direction”.

“Prudent spending is crucial as people go on vacation, but even though this small decrease in borrowing costs is a positive step, it should not be surprising that Namibians living in low-income households countrywide will not noticeably benefit from it,” Sheehama says.

He says Namibians will still not be able to afford basic needs.

“Despite moderate rates of inflation, the cost of goods and services remains high. A large percentage of commodities continue to rise and fluctuate,” he says.

The economist says the rate cut is expected to boost business investment and consumer spending.

“Namibia’s overall economic trajectory will still be influenced by external factors, even though this easing should encourage domestic economic growth.”

The next monetary policy announcement will be in February.