Namibia’s banks urged to cut lending rates in line with CMA
Moral persuasion
BoN maintains repo rate, targets consumer relief amid global uncertainty
Ogone Tlhage
The Bank of Namibia (BoN) is pressing commercial banks to lower their lending rates to match the Common Monetary Area (CMA) standard, a move aimed at easing the financial burden on consumers. With the repo rate unchanged at 6.75%, the BoN’s call to align Namibia’s higher prime rate margin of 3.75% with the CMA’s 3.5% comes amid global economic uncertainties, including trade policy shifts and tensions in the Middle East.
The CMA is a monetary union among four Southern African countries: South Africa, Namibia, Lesotho, and Eswatini.
The plea was made following this week’s announcement that the repo rate would remain unchanged at 6.75%.
Current levels high
“While the Monetary Policy Committee (MPC) has decided to maintain the repo rate at its current level, it has been discussed and observed that, within the CMA countries, the longstanding practice has been that the prime rate does not exceed 3.50 percentage points above the repo rate – with the sole exception of Namibia, which has maintained a margin of 3.75 percentage points,” the central bank said in a statement.
The move would help provide relief to banking customers facing financial strain, the central bank said, adding that commercial banking institutions would be given time to align their operating models with the CMA average.
“In this regard, the MPC is urging the commercial banks to heed the BoN’s call to start aligning their margins above the repo rate to the levels of other CMA countries. This move will address this anomaly and, in time, provide relief to consumers. Given the adjustment required to their operating models, commercial banks will be given a specified time frame to align accordingly,” the BoN said.
Rationale
Meanwhile, the BoN said it was necessary to maintain the repo rate amid global uncertainties.
“In considering the appropriate monetary policy stance, the MPC was wary of the prevailing uncertainty stemming from fundamental global economic and trade policy shifts. Furthermore, the escalating Middle East conflict and its potential ramifications for global inflation and growth could not be overlooked,” the BoN said.
“It was evident that these evolving developments were gradually working to suppress the monetary policy space that would otherwise be directed to support economic activity. This stance is also a step towards reducing the interest rate differential between Namibia and South Africa, in the interest of orderly capital flows,” it added.
The Bank of Namibia (BoN) is pressing commercial banks to lower their lending rates to match the Common Monetary Area (CMA) standard, a move aimed at easing the financial burden on consumers. With the repo rate unchanged at 6.75%, the BoN’s call to align Namibia’s higher prime rate margin of 3.75% with the CMA’s 3.5% comes amid global economic uncertainties, including trade policy shifts and tensions in the Middle East.
The CMA is a monetary union among four Southern African countries: South Africa, Namibia, Lesotho, and Eswatini.
The plea was made following this week’s announcement that the repo rate would remain unchanged at 6.75%.
Current levels high
“While the Monetary Policy Committee (MPC) has decided to maintain the repo rate at its current level, it has been discussed and observed that, within the CMA countries, the longstanding practice has been that the prime rate does not exceed 3.50 percentage points above the repo rate – with the sole exception of Namibia, which has maintained a margin of 3.75 percentage points,” the central bank said in a statement.
The move would help provide relief to banking customers facing financial strain, the central bank said, adding that commercial banking institutions would be given time to align their operating models with the CMA average.
“In this regard, the MPC is urging the commercial banks to heed the BoN’s call to start aligning their margins above the repo rate to the levels of other CMA countries. This move will address this anomaly and, in time, provide relief to consumers. Given the adjustment required to their operating models, commercial banks will be given a specified time frame to align accordingly,” the BoN said.
Rationale
Meanwhile, the BoN said it was necessary to maintain the repo rate amid global uncertainties.
“In considering the appropriate monetary policy stance, the MPC was wary of the prevailing uncertainty stemming from fundamental global economic and trade policy shifts. Furthermore, the escalating Middle East conflict and its potential ramifications for global inflation and growth could not be overlooked,” the BoN said.
“It was evident that these evolving developments were gradually working to suppress the monetary policy space that would otherwise be directed to support economic activity. This stance is also a step towards reducing the interest rate differential between Namibia and South Africa, in the interest of orderly capital flows,” it added.
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