Central bank holds borrowing rate steady
In his final policy announcement as governor, Johannes !Gawaxab announced this week that the Bank of Namibia's (BoN) monetary policy committee (MPC) has decided to maintain the repo rate at 6.5%, balancing efforts to preserve the currency peg with support for domestic economic activity."The MPC has decided to maintain the Repo rate at 6.5%, with commercial banks expected to keep their prime lending rates at 10.125%. This stance safeguards the one-to-one peg between the Namibian Dollar and the South African Rand while supporting domestic economic activity," !Gawaxab said, concluding an almost five-year tenure that began on 1 July 2020.
In formulating its policy stance, the MPC took account of prolonged global policy uncertainty and emerging risks to the domestic economy. South Africa's formal adoption of a 3% inflation target requires heightened vigilance from Namibian authorities to manage domestic inflation and maintain the exchange rate peg, !Gawaxab said.
Despite slowing domestic economic activity, the overall environment remains positive, with inflation well-contained and growth expected to recover in the medium term.
"While capital flows remained orderly and the MPC welcomed the smooth Eurobond redemption, narrowing the interest rate differential with South Africa is equally essential," !Gawaxab said.
Commercial banks have been urged to normalize the prime-repo rate spread to provide relief to households.
"The normalisation of the prime-repo rate spread, expected by year-end, should provide further support to the domestic economy, bringing the prime rate to 10%," !Gawaxab said.
Annual inflation remained contained, averaging 3.6% for the first ten months of 2025, down from 4.5% in the same period in 2024. The disinflation was primarily driven by declines in housing, transport, and alcoholic beverages. However, month-on-month inflation ticked up to 3.6% in October from 3.5% in September.
The 2025 inflation projection remains stable at 3.6%, while the 2026 forecast has been revised downward by 0.2 percentage points to 3.8%. The revision reflects assumptions of a stronger exchange rate and favorable oil prices. Key risks to the forecast include exchange rate volatility and potential increases in administered and oil prices, !Gawaxab said.
The MPC will convene again on 16 and 17 February 2026.