Chamwe Kaira
The recent interest rate cut by the Bank of Namibia has started to ease borrowing conditions, giving some relief to consumers and businesses, according to FNB economist Cheryl Emvula.
Emvula said demand for long-term and secured credit has been improving since the previous rate cut in December last year.
On 29 April, the Bank of Namibia (BoN) decided to keep the repo rate unchanged at 6.50%, maintaining the 25-basis-point difference with South Africa.
The central bank said the decision was influenced by weak economic activity, slow private sector credit growth, inflation risks and the recent strengthening of the rand.
“Looking ahead, the BoN is expected to maintain its cautious policy stance, as geopolitical tensions and financial market volatility pose upside risks to imported inflation, necessitating continued support for the currency peg and monetary stability. However, the rate pause implies that borrowing costs will likely remain elevated, likely keeping private sector credit growth subdued in the near term,” Emvula said.
Broad money supply growth slowed to 7.9% year-on-year in March, down from 8.7% recorded in February.
Emvula said money supply growth is expected to slow further because of weaker credit demand and low domestic economic activity.
He said the government’s projected domestic financing requirement of N$20.2 billion for the 2026/27 financial year is likely to keep pressure on liquidity conditions in the market.
This could result in continued government bond issuance and higher yields.
Emvula said household credit conditions remain under pressure, despite March recording the strongest household credit growth since October 2023.
“Elevated inflation risks threaten to erode real household purchasing power, while existing structural challenges continue to weigh on household finances. As such, household credit growth is expected to remain relatively subdued, averaging around 2.8% year on year in 2026. This subdued outlook is anticipated to continue weighing on the broader private sector credit extension trajectory over the medium term,” he said.
He added that corporate credit is expected to remain the main driver of private sector credit growth in 2026.
“However, the pace of growth is likely to remain contained, as businesses continue to navigate a softer domestic and global economic outlook. Under these conditions, firms are expected to maintain a cautious borrowing stance, with continued emphasis on deleveraging rather than balance sheet expansion,” Emvula said.
He warned that inflation remains a concern, especially due to tensions in the Middle East.
“Such pressures are likely to spill over into food prices, raising household consumption costs and exacerbating existing financial pressures on consumers,” he said.
