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Friday, August 22, 2008 - Web posted at 7:35:25 AM GMT Bank rates stay put BRIGITTE WEIDLICHTHE Bank of Namibia (BoN) has decided to keep its lending rate to commercial banks unchanged at 10,50 per cent, BoN Governor Tom Alweendo announced yesterday. |
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This gives home and car owners relief, as their loan repayments will remain the same. It is the fourth time this year the BoN has kept its lending rate stable and the fifth time overall, when it surprisingly did not follow a rate hike by South Africa's Reserve Bank at the end of last year. Yesterday's announcement will mean that commercial banks will not raise their interest rates either. "Although there was a noticeable increase in the inflation rate since the BoN Committee last met two months ago, we remain confident that our international reserves, which have further strengthened, remain the nominal anchor to ensure long-term price stability," Alweendo stated. Inflation peaked from 9,7 per cent in May to 11,9 per cent in July, which was largely driven by a sharp rise in transport costs due to soaring international oil prices. However, Namibia's commercial banks earn more from loan takers than in South Africa, as the lending rate of the SA Reserve Bank is 12 per cent and the prime lending rate banks charge customers is 15,5 per cent. The commercial banks in South Africa thus have a profit margin of 3,5 per cent. In Namibia the BoN's lending or repo rate to local banks is only 10 per cent, while the prime lending rate is 15,25 per cent. This gives commercial banks in Namibia a huge profit margin of a staggering 4,75 per cent when issuing loans. Dr John Steytler, BoN's Head of Research, told The Namibian yesterday that this matter was under discussion with the commercial banks. "We are also in contact with the Bankers Association of Namibia about this topic." In February this year, BoN Deputy Governor Paul Hartmann called on commercial banks to revisit their rates and adjust the prime lending rate. "Commercial banks have to bridge the gap between the reserve bank rate and the prime lending rate. "BoN views it as undesirable that the differential between the repo rate of 10,5 per cent to the commercial banks and the 15,25 prime lending rate of commercial banks remains substantial, despite the fact that the bank rate is 50 basis points lower than that of the South African repo rate," said Hartmann in February this year. Local economist Emile van Zyl welcomed yesterday's BoN decision to again keep the repo rate unchanged. "This policy has been followed for nearly a year now and it definitely helps consumers who have been hammered by soaring fuel and food prices this year," said Van Zyl, who is Executive Research Director at Simonis Storm Securities investment company in Windhoek. "Credit growth has recently decreased to around 10 per cent, down from over 20 per cent, indicating that consumers hold back on making new debt, but keeping the repo rate steady will a big relief to house owners and those who have pay off their cars," Van Zyl added. Asked if the steady level of the repo rate over the past 10 months could be seen as a Government measure to ease the burden of Namibians in line with the pro-poor strategy mentioned by Finance Minister Saara Kuugongelwa-Amadhila in her budget speech in March, Van Zyl agreed. "Bank rates affect most people and keeping them steady on the side of the BoN is surely a way of mitigating inflationary pressures on the population," the economist said. According to Van Zyl, a drop in interest rates could possibly be expected by the middle of next year. |
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