Namibia Central Bank Holds Interest Rates Steady to Support Economy, Rand Peg
In a move to bolster the economy and maintain the stability of its currency, Namibia’s central bank has decided to keep its main interest rate unchanged for the third consecutive policy meeting. This decision underscores the central bank’s commitment to protecting the peg between the Namibian dollar and the South African rand, while simultaneously providing support to the domestic economy.
The decision comes in the wake of South Africa, a key economic partner with intertwined economic activities, reducing its interest rate by 25 basis points last month. The governor of the Bank of Namibia, Johannes !Gawaxab, highlighted the importance of this decision in fostering harmony between local economic growth and sustaining capital flows. The interest rate, now positioned 25 basis points lower than South Africa’s, is seen as a strategic balance.
“Maintaining the repo rate unchanged, while the anchor country’s repo rate was reduced in July, was a further step towards narrowing the interest differential between Namibia and South Africa,” explained !Gawaxab.
The central bank also revised its inflation forecasts, lowering projections for 2025 and 2026 by 0.1 percentage points to 3.8% and 4.2%, respectively, due to lower crude oil price assumptions. Currently, inflation in Namibia is at 3.5% as of July.
However, the central bank anticipates a challenging environment in the coming years, as reflected in its revised economic growth forecasts. The sectors of agriculture, mining, and manufacturing are particularly under pressure, leading to adjustments in GDP growth predictions. For 2025, the GDP growth forecast has been adjusted to 3.5%, down from a previous estimate of 3.8% in June, while the projection for 2026 has been revised to 3.9%, slightly lower than the earlier forecast of 4.0%.
These strategic decisions and adjustments emphasize Namibia’s focus on maintaining economic stability and fostering a conducive environment for growth, despite external economic challenges and sector-specific hurdles. As the nation navigates these complexities, the central bank’s policy stances aim to protect both local economic interests and the integrity of the currency peg with the South African rand, which serves as a crucial economic anchor.
By holding the interest rate steady, Namibia’s central bank demonstrates a careful balancing act between stimulating economic growth and ensuring financial stability, a priority that is central to its long-term economic strategy.
