Central bank raises borrowing costs
The Bank of Namibia (BoN) has raised its benchmark repo rate by 25 basis points to 6.75%, its first rate increase in 2026, as rising inflation driven by higher energy prices prompted a shift towards tighter monetary policy.
The decision, announced on Wednesday following a two-day meeting of the Monetary Policy Committee (MPC), takes the prime lending rate to 10.25%.
Central bank governor Ebson Uanguta said the committee had weighed subdued domestic economic conditions against the need to contain inflationary risks and protect the currency peg.
"Balancing subdued domestic economic activity and sluggish credit extension against the imperative to maintain the currency peg and mitigate second-round effects of the energy shock, a moderate tightening of monetary policy was deemed appropriate," Uanguta said.
Headline inflation accelerated from 2.1% in March 2026 to 4.1% in May 2026, driven largely by higher transport costs linked to rising global oil prices. The Bank revised its inflation forecast upward, projecting prices to average 4% in 2026, 0.3 percentage points above its previous estimate, before easing to 3.6% in 2027.
The MPC noted that inflation had risen significantly across most monitored economies, with the South African Reserve Bank, the European Central Bank and the Bank of Japan all tightening policy at their most recent meetings. South Africa's inflation rose from 3.1% in March to 4% in April 2026.
Brent crude oil retreated to around $79 per barrel following a US-Iran interim peace agreement, though the Bank cautioned that the resumption of energy production and logistics flows would take time, maintaining near-term upward pressure on domestic prices.
Domestic economic activity remained weak over the first four months of 2026, with slowdowns recorded across mining, manufacturing, tourism and construction. Growth is nonetheless projected to recover to 2.6% in 2026, up from 1.7% in 2025, supported by uranium mining, wholesale and retail trade, and financial services.
Private sector credit extension grew 4.8% year-on-year in April, only marginally above the level recorded at the previous MPC meeting, as household borrowing edged up while credit to businesses moderated.
Namibia's merchandise trade deficit widened to N$11.7 billion in the first four months of 2026, from N$11.3 billion in the same period a year earlier, on the back of higher import costs. International reserves, however, rose to N$55.4 billion at the end of May, equivalent to 3.5 months of import cover, after standing at N$51.8 billion at the end of March.
The Bank said it would monitor inflation expectations and capital flows closely and would act as needed to contain second-round effects of the energy shock and safeguard the one-to-one peg between the Namibia Dollar and the South African Rand.
The next MPC meeting is scheduled for 10 and 11 August 2026.
