BoN kicks back on Global Finance rating

Relating the actions of the central bank and the performance of the governor, to the overall macroeconomic conditions in the country is misleading.
Phillepus Uusiku
PHILLEPUS UUSIKUThe D+ rating that the Bank of Namibia (BoN) governor, Johannes !Gawaxab, received in the Global Finance’s Central Banker Report Cards 2021, appears ‘fundamentally flawed’, the central bank said in a statement.

Even though these ratings are computed with input from analysts, economists, and other subjective sources, the Bank has noted with grave concern the inconsistency in the rating and subsequent reports stemming from the subjectivity of the interpretations of the ratings.The statement explains that relating the actions of the central bank and the performance of the governor, to the overall macroeconomic conditions in the country is inaccurate and highly misleading as the Bank is restricted to its role of ensuring monetary and financial stability.

In addition, over the past two years, Namibia’s macroeconomic stability has been tested due to the devastating effects caused by the Covid-19. During such difficult economic times confidence tends to be affected negatively, the statement reads.The deterioration of general confidence induced by Covid-19 has continued to undermine the effectiveness of central banks' measures amid the already low credit uptake, which further negatively affected consumption and investment which are key elements for economic recovery, the statement added.

The Bank is also aware that when Covid-19 hit our shores, the economy was already reeling from slowed economic activity, limiting to some extent the effectiveness of the Bank's measures.Interventions

The central bank notes that despite the shocks on the economy and financial institutions, Namibia has emerged relatively resilient thanks to the prompt measures undertaken by key stakeholders, including the Bank of Namibia. These measures were taken to maintain credit flow and to ensure that the domestic market was liquid, conditions essential in averting a crisis and a deeper recession.The central bank stressed that its two key responsibilities are to ensure monetary stability and financial stability.

“Namibia's inflation and policy rates are at historic lows, and we continue to support individual households and businesses to weather the pandemic-induced storm. We have a stable, modern, and sound financial system despite serious challenges introduced by Covid-19, banks remain profitable, well capitalised, payments and settlements continue uninterruptedly and so does credit provisioning. We continue to work closely with government, private sector agencies to ensure economic recovery and sustainable economic development going forward,” the statement said.Therefore, the rating does not invalidate the significant contributions of the monetary authority during the past 19 months. The decisions taken have effectively stabilised the system and provided a solid foundation for economic agents and authorities, to build on, in continuous efforts to recover the economy, the Bank said.

“We remain confident that the bold measures undertaken, including maintaining accommodative stance at the last monetary policy committee (MPC) meeting and further extension of the relief measures, have been appropriate given the economic conditions prevailing at the time, even with the benefit of hindsight.”Ultimately, the Bank is accountable for its actions to the Namibian people. In this regard, the Bank's actions are guided by data, economic conditions, and monetary arrangement and not by opinions and wish lists. The record speaks for itself, BoN added.

MarketContacted for comment, Simonis Storm economist, Theo Klein, stated that a central bank can only do so much within its mandate of financial sector and macroeconomic stability. Maintaining the Namibian dollar - Rand exchange rate peg, adjusting the repo rate to be accommodative, raising capital from local investors and ensuring there are adequate levels of foreign currency reserves to pay for imports amongst other are some of the tasks done quite well since the pandemic outbreak.

The central bank cannot be blamed for low consumer and business confidence which leads to low uptake of credit from commercial banks in stimulating economic growth. The central bank can merely provide an optimal financial environment in which households and businesses operate, he said.“Our banking system remains very well capitalised, interbank payments or transfers run efficiently and the banks remain operational during these times, and these are some of the main objectives of the bank. It remains important for the public to understand the function of the central bank,” Klein emphasised.

The performance of our economy is dependent on other key stakeholders such as industry regulators, government administrative services and various ministries, and not just the central bank. “We need better cohesiveness bet ween our economic policies. Monetary policy from the central bank must work in tandem with fiscal policy, trade policy, industrial policy and investment policy to name a few. Economic performance cannot be relied upon solely on the central bank,” the economist [email protected]


Namibian Sun 2023-05-29

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