Windhoek (bw) • Namibia’s central bank cut its key interest rate on Wednesday for the first time in 14 months. It is now 7.50 percent, as the interest rate was reduced by 0.25 percent.
With the interest rate cut, Namibia did not – as usual – follow the South African Reserve Bank (SARB), which left its key interest rate unchanged at 8.25 percent last month.
The head of the Bank of Namibia, Johannes Gawaxab, attributed the downward revision to an appreciation of the Namibian dollar and a weakening of crude oil prices. “As inflation and inflation expectations are slowing and nominal interest rates remain unchanged, real interest rates have risen, indicating an effective tightening of monetary policy,” said Gawaxab. The key interest rate will be discussed again in mid-October.
The key interest rate is the rate at which the central bank lends money to commercial banks in Namibia.
The prime lending rate for commercial banks will also be reduced to 11.25 percent. Monthly loan repayments will be slightly lower, which will be particularly noticeable for homeowners and vehicle owners. According to Gawaxab, four members of the BoN’s monetary policy committee voted in favor of a rate cut and the other two members opposed it.
However, the BoN chief explained that despite the reduced key interest rate, consumers in Namibia will continue to have to expect high prices for their living costs. “We have to ensure that prices do not get out of control,” he stressed.
Inflation in Namibia was 4.6% year-on-year in July, the same level as June this year, but lower than 4.9 percent in May. Namibia’s trade deficit widened to N$19.9 billion in the first half of 2024, compared to N$12.3 billion in January-June 2023. Import payments for machinery and equipment for largely increased exploration activities contributed to the trade deficit. Namibia also exported fewer diamonds, whose prices are currently lower globally.
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