CMA membership has its drawbacks

SMALLER economies in the four-member Common Monetary Area (CMA) often have to succumb to decisions made by stronger member South Africa, inspite of the existing macroeconomic situation of the other three – Namibia, Lesotho and Swaziland.

This message came from the Bank of Namibia Governor, Tom Alweendo, in speech read on his behalf at this week’s seminar on interest rate policy. Since June last year, BoN has raised its bank rate by 350 basis points to 10,5 per cent last month.Commercial banks have also increased their prime rate to 15,25 per cent from 14,75 per cent over the same period – which comes as bad news to the already burdened consumers.Inflationary pressures have been cited as the cause of these rate hikes.Alweendo said current economic conditions did not warrant the increasing of the repo rate on October 11.But BoN was forced to make an increase to keep rates aligned with those in the wider CMA area.”The Bank of Namibia would have preferred a neutral monetary policy stance to assess the impact of previous interest rate increases.”Namibia shares the CMA with South Africa, Lesotho and Swaziland – with the three small countries’ currencies pegged to the South African rand.Alweendo said the weakness with the CMA was the lack of proper engagement between the four members – which would sometimes lead to undesired results.”The most often cited weakness with the CMA is the lack of adequate consultation and the practice by the South African Reserve Bank of unilateral setting monetary policies without taking due attention of the economic dictates of the smaller economies of Lesotho, Namibia and Swaziland.”He said despite efforts to share economic developments between the four countries, the final CMA policy stance was the ‘exclusive domain’ of the South African Reserve Bank.The Governor, however, said remaining a member of the CMA was the best option currently.”I would like to conclude that there is no need for us to reconsider our participation in the CMA, rather we should remain steadfast and pro-actively participate in the deeper integration in the CMA and SADC,” he said.The meeting was held to discuss current economic policies in Namibia, particularly monetary policy.Speaking at the same occasion, National Union of Namibia Workers (NUNW) Secretary General Evilastus Kaaronda accused the central bank’s monetary policy of mainly targeting inflation, which was overshadowing major economic challenges such as unemployment, widespread poverty and income inequalities.He said the working class – mostly ordinary low-income earners – was suffering for the sins of the ‘haves’ who were the ones behind surging inflation, which subsequently leads to bank rate hikes.Kaaronda said in light of the increasing bank rate, and high cost of living, the workers’ union would be left with no choice but to demand high salary increases to replenish the workers’ deteriorating income.”As workers we are opposed to the bank’s strategy of prioritising inflation targeting over and above national development objectives,” Kaaronda said.Since June last year, BoN has raised its bank rate by 350 basis points to 10,5 per cent last month.Commercial banks have also increased their prime rate to 15,25 per cent from 14,75 per cent over the same period – which comes as bad news to the already burdened consumers.Inflationary pressures have been cited as the cause of these rate hikes.Alweendo said current economic conditions did not warrant the increasing of the repo rate on October 11.But BoN was forced to make an increase to keep rates aligned with those in the wider CMA area.”The Bank of Namibia would have preferred a neutral monetary policy stance to assess the impact of previous interest rate increases.”Namibia shares the CMA with South Africa, Lesotho and Swaziland – with the three small countries’ currencies pegged to the South African rand.Alweendo said the weakness with the CMA was the lack of proper engagement between the four members – which would sometimes lead to undesired results.”The most often cited weakness with the CMA is the lack of adequate consultation and the practice by the South African Reserve Bank of unilateral setting monetary policies without taking due attention of the economic dictates of the smaller economies of Lesotho, Namibia and Swaziland.”He said despite efforts to share economic developments between the four countries, the final CMA policy stance was the ‘exclusive domain’ of the South African Reserve Bank.The Governor, however, said remaining a member of the CMA was the best option currently.”I would like to conclude that there is no need for us to reconsider our participation in the CMA, rather we should remain steadfast and pro-actively participate in the deeper integration in the CMA and SADC,” he said.The meeting was held to discuss current economic policies in Namibia, particularly monetary policy.Speaking at the same occasion, National Union of Namibia Workers (NUNW) Secretary General Evilastus Kaaronda accused the central bank’s monetary policy of mainly targeting inflation, which was overshadowing major economic challenges such as unemployment, widespread poverty and income inequalities.He said the working class – mostly ordinary low-income earners – was suffering for the sins of the ‘haves’ who were the ones behind surging inflation, which subsequently leads to bank rate hikes.Kaaronda said in light of the increasing bank rate, and high cost of living, the workers’ union would be left with no choice but to demand high salary increases to replenish the workers’ deteriorating income.”As workers we are opposed to the bank’s strategy of prioritising inflation targeting over and above national development objectives,” Kaaronda said.