Josef Sheehama reacts to the decision of Bank of Namibia to keep repo rate unchanged

By Josef Sheehama

The decision of Bank of Namibia to keep repo rate unchanged is a shocking because inflation rates is stable, and our international reserve remain strong. The policymakers try to navigate risks to inflation and the timing of when global interest rates will start to fall. I understand that the decision influences by several factors contributing to the status quo. We are aware that Namibia’s currency,  is pegged to the South African rand at a one-to-one ratio and will do all in their power to protect the peg. I am aware that the decrease in repo rate result that Namibia will behind by 75 bps, however this was perfect opportunity to provide relief to the Namibians. With high global market volatile, a chance to disturbing global markets cannot overruled due to geopolitics.

We understand the current narrow industrial and export base in Namibia which make difficult to withstand the external shocks and therefore need to safeguard the peg. Our current economy is very reliant on a limited number of sectors such as fishing, diamonds, and uranium mining. Namibia needs to gradually move away from single country concentration. Additionally, we can’t rely on South Africa for almost everything. We need to ask ourselves why we can’t produce our own. As a country, we cannot afford to depend on other countries. The Namibian economy has been experiencing economic uncertainties like high inflation, high unemployment rate, high exchange rate, depreciation, low investment, and negative growth.

Namibia must reduce its commodity dependence, which may expose it to volatile markets. We need to understand that concentrated trade relationships may create levels of risk beyond the appetite of the country, for instance, if policies restrict flows between countries, and it may make sense to spin off or divest such flows while pursuing new domestic markets. Therefore, Namibia should take a stand on its own feet.

The next move in interest rates will be down but don’t be surprised if the Bank of Namibia maintained repo rate at current level. I expect that the Bank of Namibia forecasts can help us to refine predictions of when interest rates will start coming down and by how much. It is quite certain that the Bank of Namibia will not be cutting the repo rate as deeply as it did during the COVID-19 crisis. At present, I believe the repo rate could ease by a cumulative 100 basis points between 2024 and end-2025.