Foreign reserves dip slightly

09 January 2019 | Economics

Namibia's stock of foreign currency reserves declined slightly as a result of increased foreign currency purchases made just before the start of the festive season last year November, the Bank of Namibia reported in a Money and Banking statistics report released recently.

The level of international reserves decreased to N$29.5 billion at the end of November from N$31.1 billion recorded in the previous month.

This translates into four months of import cover, still sufficient to maintain the one-to-one currency peg with the South African rand.

“The decrease in the level of reserves is mainly due to “net capital outflows from the commercial banks as a result of increased foreign currency purchases coupled with net government payments and the exchange rate appreciation,” the central bank said.

In its assessment, PSG Konsult said inflows and an increase in the level of foreign reserves were not expected for the rest of the calendar year.

“Looking ahead, inflows from the Southern African Customs Union (SACU) are expected to be weaker than in recent years due to the lacklustre performance of the South African economy, which shrinks the SACU revenue pool,” PSG Konsult said.

Government had recently received a N$3-billion tranche from a N$10-billion loan taken up with the African Development Bank. This, PSG Konsult felt, would go some way in improving the country's foreign exchange reserves in the short to medium term, although it would not be enough to match the level of reserves witnessed during the country's boom years.

“On the bright side, inflows from the African Development Bank loan agreement will continue to boost foreign reserves this year. In general, the growth in monetary aggregates is well below levels seen during the economic boom years of 2010 to 2015 and suggests that real gross domestic product growth remains sluggish,” PSG Konsult said.

OGONE TLHAGE

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