BoN’s bank rate remains unchanged

THE Bank of Namibia (BoN) has decided to leave its bank rate unchanged at 7,75 per cent due to a favourable economic climate.

BoN Governor Tom Alweendo said last week the central bank thoroughly reviewed the recent international and domestic economic developments, and based on that information the bank decided to leave the bank rate unchanged. “All things considered, and in view of the generally favourable inflation outlook and the recent robust recovery in the real GDP growth, the Bank of Namibia has decided to leave the Bank rate unchanged…”Given the current exchange rate arrangement, this decision is also taken in line with the South African Reserve Bank Monetary Policy Committee’s decision that left the repo rate at its current level,” said Alweendo in a monetary policy statement.The bank believes that the current monetary policy stance will continue to create a favourable business environment and thereby boost domestic economic activities.Since the beginning of the local currency has gained and stabilised on against major international currencies.The Namibian dollar appreciated from N$6,9 to the greenback in January to N$6,6 in March and gaining significant ground to N$6,5 last month.This exchange rate trend and its outlook, according to Alweendo, seem to be supportive of favourable inflationary outlook in the immediate future.However, in contrast to the downward trend observed since early last year, annual inflation rate this year rose from 2,4 per cent in January to 4,1 per cent in April.”The increase in overall annual inflation since the beginning of the year is mainly attributed to the continuous increase in food prices.Food inflation rose from 2,9 per cent in March to 3,6 per cent in April.Price increases of services, which have also contributed secondarily to the overall inflation at the beginning of the year, have recently slowed down falling from 6,9 per cent in March to 6,4 per cent in April.However, Alweendo was optimistic saying, “Overall the consumer price statistics show that inflation, although rising, does not seem as yet to pose any serious threat, as it still moves within a reasonable range.Furthermore other factors that could contribute to higher inflationary pressures such as money supply and Government expenditures remain relatively stable.”He added that the world oil price remains the major factor that might create uncertainties for domestic inflation, “however the current indications are that it may abate soon, particularly, with the recent increase in Opec’s production quota” by two million barrels per day from July and add an extra 500 000 barrels per day from August,which is expected to help reduce the current oil price pressure.Growth in broad money supply slowed moderately on annual basis from 19,5 per cent in March to 16,1 per cent the following month.Alweendo said responsible for this slow down was claims on central government which contracted significantly by 88 per cent.Also putting upward pressure on money supply growth was net foreign assets and domestic credit which grew by 29 per cent and 10,3 per cent, respectively, over the same period.Growth in the banking system private sector credit also slowed down from 21,8 per cent in March to 21,3 per cent in April.This was reflected in credit to individuals which was down to 6,8 per cent in April from 14,4 per cent in March this year.In contrast, credit extended to businesses grew significantly by 46,8 per cent in April compared 35,3 per cent in March.BoN’s next scheduled date for announcing its bank rate position is August 12 2004.”All things considered, and in view of the generally favourable inflation outlook and the recent robust recovery in the real GDP growth, the Bank of Namibia has decided to leave the Bank rate unchanged…”Given the current exchange rate arrangement, this decision is also taken in line with the South African Reserve Bank Monetary Policy Committee’s decision that left the repo rate at its current level,” said Alweendo in a monetary policy statement.The bank believes that the current monetary policy stance will continue to create a favourable business environment and thereby boost domestic economic activities.Since the beginning of the local currency has gained and stabilised on against major international currencies.The Namibian dollar appreciated from N$6,9 to the greenback in January to N$6,6 in March and gaining significant ground to N$6,5 last month.This exchange rate trend and its outlook, according to Alweendo, seem to be supportive of favourable inflationary outlook in the immediate future.However, in contrast to the downward trend observed since early last year, annual inflation rate this year rose from 2,4 per cent in January to 4,1 per cent in April.”The increase in overall annual inflation since the beginning of the year is mainly attributed to the continuous increase in food prices.Food inflation rose from 2,9 per cent in March to 3,6 per cent in April.Price increases of services, which have also contributed secondarily to the overall inflation at the beginning of the year, have recently slowed down falling from 6,9 per cent in March to 6,4 per cent in April.However, Alweendo was optimistic saying, “Overall the consumer price statistics show that inflation, although rising, does not seem as yet to pose any serious threat, as it still moves within a reasonable range.Furthermore other factors that could contribute to higher inflationary pressures such as money supply and Government expenditures remain relatively stable.”He added that the world oil price remains the major factor that might create uncertainties for domestic inflation, “however the current indications are that it may abate soon, particularly, with the recent increase in Opec’s production quota” by two million barrels per day from July and add an extra 500 000 barrels per day from August,which is expected to help reduce the current oil price pressure.Growth in broad money supply slowed moderately on annual basis from 19,5 per cent in March to 16,1 per cent the following month.Alweendo said responsible for this slow down was claims on central government which contracted significantly by 88 per cent.Also putting upward pressure on money supply growth was net foreign assets and domestic credit which grew by 29 per cent and 10,3 per cent, respectively, over the same period.Growth in the banking system private sector credit also slowed down from 21,8 per cent in March to 21,3 per cent in April.This was reflected in credit to individuals which was down to 6,8 per cent in April from 14,4 per cent in March this year.In contrast, credit extended to businesses grew significantly by 46,8 per cent in April compared 35,3 per cent in March.BoN’s next scheduled date for announcing its bank rate position is August 12 2004.