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The Bank of Namibia has reduced the repo rate by 25 basis points from 7.75% to 7.50%.

The central bank's decision aims to strengthen domestic economic activity and maintain the stability of the Namibia Dollar's peg to the South African Rand, supported by sufficient international reserves.

The central bank's decision to lower the repo rate means a reduction in the interest rate at which it lends to commercial banks. 

Thus, the bank's prime lending rate will decrease from 11.50% to 11.25%, marking the first adjustment since the 50 basis point hike to 7.75% in June last year.

This decrease provides relief to consumers, as lower interest rates can stimulate borrowing for major purchases such as homes and cars, potentially boosting overall spending.

Such a reduction is expected to support economic growth and enhance liquidity in the financial system.

As for the private sector credit growth, it has been slow due to weakened demand amid high interest rates.

GDP growth is also forecast to slow to 3.1% in 2024 but is expected to recover to 3.9% in 2025, mainly influenced by low global demand and ongoing drought conditions that have negatively impacted the primary sector, particularly diamond mining and agriculture.

In the first half of 2024, domestic economic activity improved compared to 2023, with most sectors seeing growth except for certain minerals and construction.

Inflation is also easing, projected to average 4.7% in 2024 and 4.4% in 2025.

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Author
Celma Ndhikwa