Namibian central bank has increased the benchmark rate by 25 basis points to 4.25%.
This is the second consecutive hike by the monetary authorities to safeguard the Namibian Dollar(N$) peg with South Africa’s Rand and inflationary pressure occasioned by the Ukraine-Russian conflict.
Namibian Central Bank Governor Johannes !Gawaxab said the hike follows that in February, which began unleashing the 2020 monetary policy stimulus aimed at an economy hit by the effects of the COVID-19 pandemic.
In March, South African Reserve Bank(SARB) raised the key rate by a quarter-point.
Namibia has a common monetary area with South Africa, with the rand legal tender and monetary policy and foreign-exchange rules often guided by the SARB’s actions.
While inflation slowed in February to 4.5%, Nairobi’s central bank sees it averaging 6% in 2022, up from an earlier 4.4% forecast. That’s after supply shocks arising from the war in Ukraine fanned oil and food prices. Gasoline prices rose 11% in April.
While the hike should safeguard Namibia’s currency peg, curb inflation and bolster the attractiveness of local assets to offshore investors as the U.S. Federal Reserve and other developed market central banks tighten monetary policy, it may temper an already fragile economic recovery.
The bank left its economic growth forecast unchanged at 3%.
“International reserves stood at 40.8 billion Namibian dollars ($2.8 billion) at the end of March, compared with 43 billion Namibian dollars a month prior. That’s enough to cover 5.5 months of imports and sufficient to help maintain the currency peg,” said !Gawaxab.