Interest rates to stay same: BoN

THE Bank of Namibia yesterday announced that its bank rate would remain unchanged at 10,5 per cent following a meeting on Wednesday to decide on its monetary policy stance for the next two months.

Bank of Namibia Governor Tom Alweendo said they had taken cognisance of the turmoil in global financial markets, saying that while it had “negatively impacted on the outlook of the international economy in terms of declining equity prices across major stock markets, there are also encouraging signs that some exogenous factors such as high food and fuel prices that have to a large extent driven domestic inflation, have started to abate”. He added that the effect of the worldwide banking crisis had serious implications on the world economy, but that for Namibia, the impact had been more of an economic than a financial one.In this regard, Alweendo forecast that a combination of a likely decrease in commodity prices and a decrease in foreign direct investment flows could slow down economic growth.Alweendo said that although the overall inflation rate for August and September had remained relatively high at 12 per cent, “domestic demand conditions were relatively restrained, providing assurance that the less accommodative monetary policy stance of the Bank has been effective in containing price pressures originating from domestic sources of inflation.”The governor also stated the Bank’s confidence that the currency peg to the South African Rand continues to be sustainable, adding that “liquidity conditions in the banking system remain favourable and there has been no excessive or undesirable outflow of capital”.Since the last executive committee meeting, international reserves had been strengthened from N$11.5 billion to N$12 billion – regarded as a sufficient cushion to sustain the currency peg.The exchange rate has also been affected by the global financial turmoil, and Alweendo explained that the devaluation of the South African rand had to do with investors leaving emerging markets.He added that the effect of the worldwide banking crisis had serious implications on the world economy, but that for Namibia, the impact had been more of an economic than a financial one.In this regard, Alweendo forecast that a combination of a likely decrease in commodity prices and a decrease in foreign direct investment flows could slow down economic growth.Alweendo said that although the overall inflation rate for August and September had remained relatively high at 12 per cent, “domestic demand conditions were relatively restrained, providing assurance that the less accommodative monetary policy stance of the Bank has been effective in containing price pressures originating from domestic sources of inflation.”The governor also stated the Bank’s confidence that the currency peg to the South African Rand continues to be sustainable, adding that “liquidity conditions in the banking system remain favourable and there has been no excessive or undesirable outflow of capital”.Since the last executive committee meeting, international reserves had been strengthened from N$11.5 billion to N$12 billion – regarded as a sufficient cushion to sustain the currency peg.The exchange rate has also been affected by the global financial turmoil, and Alweendo explained that the devaluation of the South African rand had to do with investors leaving emerging markets.