Banks cannot be forced to be accommodative

The central bank cannot force commercial banks to be accommodative by reducing the interest rate spread as there is a risk of failure.Interest rate spread is the difference between the Bank of Namibia’s repo rate and the commercial banks’ prime lending rate.These sentiments were shared by the governor of the Bank of Namibia (BoN) Johannes !Gawaxab at the monetary policy announcement yesterday.The central bank increased the repo rate by 50 basis points from 4.25% to 4.75%. This implies that the prime lending rate for local commercial bank also increased from 8.0% to 8.50%.Given the current rates, there is a 375 basis points spread between the prime lending rate and the repo rate.Speaking at the announcement, !Gawaxab notes that the decision to increase the repo rate considered the elevated global and domestic inflationary pressures, the fragile economic recovery, and the need to safeguard the one-to-one link between the Namibia Dollar and the South African Rand, while meeting the country&#039;s international financial obligations.In addition, the monetary policy stance is necessary to narrow the current negative real policy interest rate that is conducive to long-term economic growth.The domestic economy rebounded in the first four month of 2022 and was mainly driven by increased activity in the mining, agriculture, transport, tourism, wholesale and retail trade, as well as communication sectors, he added.InflationHe further pointed out that food and fuel inflation is expected to remain elevated and may continue to have a disproportionate effect on the low-income segment in Namibia, and therefore requires continued close monitoring.Statistics released by the Namibia Statistics Agency (NSA) yesterday indicated that the inflation rate during May 2022 increased by 5.4%, compared to 3.8% recorded in May 2021. Inflation continues to be driven by the transport and food categories.Moreover, growth in private sector credit extension (PSCE) increased to 2.9% during the first four months of 2022, higher than the 2.3% registered during the same period in 2021.“Although there is an improvement in the PSCE, the growth rate remains historically low, indicative of very subdued conditions in the credit market,” !Gawaxab said.Lastly, as at the 31st of May 2022, the stock of international reserves stood at N$43.9 billion compared to N$40.8 billion at the end of March 2022. The increase in international reserves was partly due to currency depreciation and Southern African Customs Union (SACU) receipts (N$3.5 billion) received in April 2022. -phillep@nmh.com.na

Banks cannot be forced to be accommodative

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Namibian Sun 2026-04-02

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Banks cannot be forced to be accommodative

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Namibian Sun 2026-04-02

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