The Bank of Namibia (BoN) has decided to increase the repo rate by 75 basis points, to 6.5%.

The central bank also warned that inflation, which is the main cause of the repo rate, will persist for a longer period of time, driven by factors beyond Namibia's control.

When the central bank pushes up the repo rate, it does so in response to and to arrest runaway inflation.

These hikes discourage borrowing and reduce the amount of money in the economy, meaning fewer resources to spend.

As spending drops, it becomes difficult for the prices of goods and services to increase, and this helps to keep inflation under control.

A rise in the repo rate means individuals who have taken out bank loans will have to pay more in interest while servicing their loans.

Meanwhile, domestic economic activity has shown improvement over the first three quarters of this year.

However, the underlying causes of inflation remain a concern for the central bank, which warns of tough times ahead.

Growth in the domestic economy is mainly driven by sectors, including mining and agriculture, where activities related to livestock marketing contribute.

Wholesale and retail trade, communication, and tourism also have a hand in the growth.

On a worrying note, the construction sector continued to weaken, as reflected in decreased activity by both public and private entities.

Inflation is also projected to persist for longer due to the conflict between Russia and Ukraine, felt through global supply chain disruptions and unstable oil and food prices.

Namibia's annual average inflation rate increased to 5.8% during the first nine months of 2022, compared to 3.5% recorded during the same period last year.

Heading into the future, the domestic economy is expected to grow by 3.2% this year, down from a recorded growth rate in 2021 of 2.7%.