Repo rate still unchanged at 7%

THE central bank of Namibia left its repo rate unchanged at seven per cent after taking into account all the relevant economic factors including inflation, which has remained subdued in the past recent months.

The decision was also made in line with the South African Reserve Bank’s Monetary Policy Committee resolution on Thursday that left its bank rate unchanged at seven per cent. This repo rate stance is the same, as the neighbouring countries are part of a common monetary area which includes Lesotho and Swaziland.Bank of Namibia (BoN) Governor Tom Alweeendo noted that the current monetary stance was supportive of further capital formation and robust economic activity and called on the business community to take advantage of the low level of interest rates to expand and diversify their economic activities.Alweendo added, however, that there were still conditions to monitor that could upset the present monetary position.He also said the data on key sector indicators – such as diamonds and base metals production – showed a decline in the second quarter of this year compared to last year, which could signal a slowdown in economic growth.”The Bank of Namibia has observed with concern the subdued growth in real sector activities, which may necessitate accommodative monetary policy.However, the prevailing high growth in private sector credit which has a negative bearing on the balance of payment, as well as the high international oil prices, are not supportive of such a stance.Therefore…the Bank of Namibia has decided to take a neutral stance by leaving its bank rate unchanged at seven per cent,” he said.Despite annual inflation rising slightly in June to 1,3 per cent from 0,9 per cent in May, Alweendo said inflation remained low compared to an annual rate of 2,6 per cent recorded in February, which is thus far the highest rate recorded this year.Credit extended to the private sector eased a little to 18 per cent in June from 18,3 per cent in May and 19 per cent in April.For the first half of the year, private sector credit recorded an average growth rate of 18,9 per cent, which is higher than the average of 15 per cent that was recorded in the corresponding period of last year.Alweendo compared the easing in credit extension to the private sector in June to the credit given to individuals which also went down to 23,3 per cent from 24,4 per cent of May.Credit to the business sector grew by 10,1 per cent in June from 9,3 per cent in May.”Growth in credit to the business sector is likely to stimulate business activities and thereby contribute to economic growth.”The annual growth in the broad money supply increased strongly by 19,2 per cent in June following a growth rate of 15,5 per cent registered in May.Alweendo said the Namibia dollar, which had been depreciating against major currencies since the beginning of the year, had picked up the momentum since last month.He said the recent strengthening of the local currency could be attributed to strong commodity prices.The Namibia dollar was on Friday trading at 6,3499 against the greenback, 11,4198 against the pound and 7,9222/euro.Alweendo maintained his cautionary view on the surging oil prices, implying they were a cause for concern by noting that higher oil prices seemed to have started affecting the world economic growth in major world economies in the second quarter of 2005, as well as rising inflation.On Friday, oil prices surged to record highs at above US$66 (N$419) per barrel as investors fretted over the world’s strained capacity to refine and pump crude oil.This repo rate stance is the same, as the neighbouring countries are part of a common monetary area which includes Lesotho and Swaziland.Bank of Namibia (BoN) Governor Tom Alweeendo noted that the current monetary stance was supportive of further capital formation and robust economic activity and called on the business community to take advantage of the low level of interest rates to expand and diversify their economic activities.Alweendo added, however, that there were still conditions to monitor that could upset the present monetary position.He also said the data on key sector indicators – such as diamonds and base metals production – showed a decline in the second quarter of this year compared to last year, which could signal a slowdown in economic growth. “The Bank of Namibia has observed with concern the subdued growth in real sector activities, which may necessitate accommodative monetary policy.However, the prevailing high growth in private sector credit which has a negative bearing on the balance of payment, as well as the high international oil prices, are not supportive of such a stance.Therefore…the Bank of Namibia has decided to take a neutral stance by leaving its bank rate unchanged at seven per cent,” he said.Despite annual inflation rising slightly in June to 1,3 per cent from 0,9 per cent in May, Alweendo said inflation remained low compared to an annual rate of 2,6 per cent recorded in February, which is thus far the highest rate recorded this year.Credit extended to the private sector eased a little to 18 per cent in June from 18,3 per cent in May and 19 per cent in April.For the first half of the year, private sector credit recorded an average growth rate of 18,9 per cent, which is higher than the average of 15 per cent that was recorded in the corresponding period of last year.Alweendo compared the easing in credit extension to the private sector in June to the credit given to individuals which also went down to 23,3 per cent from 24,4 per cent of May.Credit to the business sector grew by 10,1 per cent in June from 9,3 per cent in May.”Growth in credit to the business sector is likely to stimulate business activities and thereby contribute to economic growth.” The annual growth in the broad money supply increased strongly by 19,2 per cent in June following a growth rate of 15,5 per cent registered in May.Alweendo said the Namibia dollar, which had been depreciating against major currencies since the beginning of the year, had picked up the momentum since last month.He said the recent strengthening of the local currency could be attributed to strong commodity prices.The Namibia dollar was on Friday trading at 6,3499 against the greenback, 11,4198 against the pound and 7,9222/euro.Alweendo maintained his cautionary view on the surging oil prices, implying they were a cause for concern by noting that higher oil prices seemed to have started affecting the world economic growth in major world economies in the second quarter of 2005, as well as rising inflation.On Friday, oil prices surged to record highs at above US$66 (N$419) per barrel as investors fretted over the world’s strained capacity to refine and pump crude oil.