BoN declares millions in dividends
MPC lowered its benchmark rate to its historically lowest level to help cushion businesses and households from the devastating effect of the pandemic.
06 April 2021 | Economics
The low interest rate environment resulted in lower interest earned on the bank’s assets. Johannes !Gawaxab, Governor: Bank of Namibia (BoN)
The low interest rate environment as a result of the Covid-19 pandemic negatively affected the Bank of Namibia’s (BoN) financial performance.
Despite the unfriendly environment, the central bank still managed to record a surplus of N$532.4 million and declared dividends of N$278.2 million to the government for its 2020 financial year.
However, compared to the previous period, dividends declared to the government stood at N$399 million in 2019, a decrease of N$120.8 million or 30.3%.
According to Johannes !Gawaxab, the governor of the Bank of Namibia (BoN), the bank pursued expansionary monetary policy, and relaxed regulatory requirements to cushion households and businesses from the devastating impact of Covid-19.
The domestic economy registered a deep contraction in 2020, with notable declines across the primary, secondary, and tertiary industries. Namibia’s real Gross Domestic Product (GDP) is estimated to have contracted by 8.0% in 2020, from a milder decline of 0.6% in 2019, he added.
The dismal performance in 2020 was broad-based with the sharpest declines in output recorded in the tourism-related hotels and restaurants and transport sectors, while mining, agriculture, manufacturing, construction, wholesale and retail trade, as well as the public sector also registered negative growth.
This was mainly due to the negative effects of the Covid-19 pandemic. However, a better performance was registered in the electricity and water as well as information and communication sectors, he emphasised.
Namibia’s inflation rate declined further during 2020 compared to 2019, driven mainly by a decline in inflation for transport and housing. The inflation rate averaged 2.2% in 2020, lower than the 3.7% recorded in 2019 and in fact the lowest since independence.
The lower inflation was largely reflected in a decrease in inflation for the categories of housing and transport.
During 2020, the bank’s Monetary Policy Committee (MPC) lowered its benchmark rate to its historically lowest level to help cushion businesses and households from the devastating effect of the Covid-19 pandemic, !Gawaxab pointed out.
The MPC cut the repo rate by a total of 275 basis points to 3.75%, down from 6.50% at the beginning of 2020. The commercial banks also reduced their prime lending rates from 10.25% at the end of 2019 to 7.50% at the end of 2020. In addition, the bank introduced further regulatory and policy relief measures which complemented the monetary policy stance, he said.