CHAMWE KAIRA
Simonis Storm has said it believes the balance of economic indicators supports the Bank of Namibia keeping interest rates unchanged at its next Monetary Policy Committee meeting.
The firm said while persistent inflation reduces the likelihood of an interest rate cut in the near term, improving currency conditions and a narrowing contraction in net foreign assets provide some room for the central bank to pause, with future policy decisions expected to remain dependent on incoming economic data.
Following the Bank of Namibia’s decision to raise the repo rate by 25 basis points to 6.75% in June, the real repo rate remained at approximately 2.4 percentage points, which Simonis Storm described as a restrictive monetary policy stance.
Meanwhile, broad money supply (M2) growth eased slightly from its post-2020 peak but remained elevated at 11.5%.
Government financing requirements were broadly unchanged in absolute terms during the month, although annual growth in government borrowing rose to 73.1%.
Namibia’s private sector credit extension (PSCE) showed signs of strengthening in June, with both household and corporate borrowing accelerating simultaneously for the first time in the current credit cycle, according to an analysis by Simonis Storm.
The firm expects headline PSCE growth to remain within a range of 4.0% to 5.0% through the third quarter of 2026 but cautioned that the sustainability of the recovery will depend largely on whether business lending continues to improve.
Storm identified the turnaround in business “other loans and advances” as the most significant indicator to watch in the coming months. The category rebounded to annual growth of 2.5% in June from a contraction of 2.4% in May, ending three consecutive months of declines.
The brokerage said a repeat of June’s performance would strengthen the outlook for corporate credit, while a return to contraction would reinforce concerns that business lending remains structurally weak.
Headline PSCE growth increased to 4.5% year-on-year in June from 4.3% in May. Corporate credit growth edged up to 4.5% from 4.4%, while household credit accelerated to 4.5% from 4.2%.
Household mortgage lending continued to improve, rising to 2.1% from 1.9% in May. In contrast, corporate mortgage credit returned to negative territory, declining by 1.1% after recording growth of 0.3% in the previous month. Business overdrafts and installment credit also continued to moderate from earlier highs.
Inflation remained a key concern, with annual consumer price inflation accelerating to 4.4% in June from 4.1% in May, marking the fourth consecutive monthly increase.
Simonis Storm noted that inflation rose despite stable fuel prices and a partial recovery of the Namibian dollar against major currencies.
The brokerage said Namibia’s inflation rate is now broadly aligned with recent South African inflation levels of between 4.4% and 4.5%.
