BoN alarmed about credit growth

NAMIBIANS are on a credit spending spree and the Bank of Namibia (BoN) might be forced to intervene with measures higher interest rates, to prevent consumers from burying themselves in debt.

‘Concerning’, ‘disturbing’ and ‘worrying’ were the words BoN Governor Ipumbu Shiimi used yesterday when he commented on the credit growth of households on ‘less productive activities’ like cars.Shiimi announced that the BoN will keep its repo rate unchanged at six per cent, but cautioned households to ‘minimise’ instalment sales, personal loans, overdrafts and using credit cards.He said the recent credit growth trend is even more disturbing seen against the backdrop of the latest national account statistics, which show that Namibians are saving less.The National Accounts for 2011, released by the Namibia Statistics Agency on Tuesday, showed that the ratio of the average rate of gross savings to gross domestic product (GDP) dropped from 28,7 per cent between 2000 and 2009 to 18,4 per cent last year.’Namibians tend to spend too much and it’s easy to spend,’ Statistician General, John Steytler said.Shiimi yesterday said that credit granted to the private sector in April stood at 13,2 per cent, the highest annual growth rate since December 2007.He said that the BoN ‘will look into its toolkit if the situation starts to get out of hand,’ adding that hiking interest rates would be an option.Shiimi said a closer analysis of April’s credit growth showed a concerning increased borrowing by the household sector. Instalment credit registered an annual growth rate of 22 per cent, vehicle sales were up 26,9 per cent, while borrowing through personal loans and credit cards gained 13,9 per cent. Household overdrafts grew by 14,4 per cent on an annual basis.’This development, viewed together with Namibia’s saving rate which has been declining over the past few years, is a cause for concern,’ Shiimi said.Steytler on Tuesday said between 2000 and 2009, Namibia’s ratio of gross savings to GDP was bigger that its ratio of gross fixed capital formation (GFCF) to GDP, namely 28,7 per cent to 20,6 per cent.’This suggests that the savings rate was outstripping the investment rate by some 8,1 percentage points, a situation very unusual for developing countries such as Namibia,’ he said.However, the situation has reversed since 2010. Last year, Namibia’s ratio of gross savings to GDP stood at 18,4 per cent compared to the 21 per cent of GFCF to GDP.Namibia ‘really doesn’t have a savings culture’, Steytler said, warning that if savings continued at current levels, it would restrain investment.Shiimi yesterday said despite the significant growth in credit, there were no indications of distress in the banking sector. Non-performing loans remain low, he said.