International reserves rose by 0.7% to N$58.5 billion in August

CHAMWE KAIRA

The official stock of international reserves rose modestly by 0.7% on a monthly basis to N$58.5 billion at the end of August.

The increase was primarily due to net commercial bank transfers and strong Customer Foreign Currency (CFC) placements by commercial banks during the month, the Bank of Namibia said.

In addition, growth momentum was further supported by positive changes in the market value of asset swaps, interest received and gold purchases during the month.

These increases were partially offset by government payments, negative foreign exchange revaluation effects and lower external manager valuations.

In terms of reserve adequacy metrics, this level of reserves translated to an estimated import cover of 3.6 months, and four months when excluding oil and gas exploration and appraisal related imports.

At this level, reserves were estimated to be 10 times the currency in circulation, a position considered adequate to sustain the currency peg between the Namibia dollar and South African rand, while meeting the country’s short-term international obligations.

The Namibian banking industry’s cash balances decreased further in August, relative to July the banking industry cash position declined moderately by 3.4% to N$6.5 billion in August.

The observed decrease was mainly attributed to outflows associated with the increased government borrowing, the central bank said.

Annual growth in other loans and advances stood at 4.7% at the end of August, relative to a negative growth of 0.3% posted in July.

The increase was attributed to higher uptake by households and corporates in the manufacturing, transport and logistics sectors.

Growth in mortgage credit stood at 1.9% in August, a marginal uptick from a 1.6% growth rate registered in the preceding month.

The slightly higher total mortgage credit growth emanated mainly from an increase in uptake by households which inched up to 2.8% in August from 2.4% a month prior.

Annual growth in credit extended to the corporate sector stood at 5.9% during the month under review, higher than 3.7% in July.

The increase in business credit growth was on account of higher uptake in overdrafts, as well as other loans and advances by corporates in the real estate, mining, retail, fishing, transport and logistics, manufacturing, and business services sectors.

The total domestic private sector loan balance stood at N$127.1 billion, reflecting annual growth of 5.4%, an increase from the 4.2% growth recorded in July. This is the highest growth recorded since September 2025, an indication of improved demand.

Contributing further to the higher overall growth in PSCE was household credit whose growth inched higher to 4.9% during August from 4.6% recorded during the previous month.

Annual growth in broad money (M2) rose marginally in August increasing to 10.2% during August from 9.1% registered in July.

Almandro Jansen, an economist from Simonis Storm noted that the repo rate is now 50 basis points higher in SA (7.25%) than in Namibia (6.75%).

“Under the peg, the Bank of Namibia cannot leave that gap open for long without risking capital outflows. With the Consumer Price Index at 5%, this strengthens the case for a hike in October,” he noted.

Jansen noted that Namibian credit is growing at about 70% of SA’s pace and only 0.3% in real terms. “Namibia would feel any further SA-led tightening from a weaker starting point.”

Simonis expects the BoN to raise the repo rate by 25bp to 7% in October to protect the peg and respond to rising inflation.