CHAMWE KAIRA
FNB Namibia is of the view that the Monetary Policy Committee of the Bank of Namibia will maintain the repo rate at 6.75% in 2025.
Any unforeseen strain on reserves may lead the BoN to adjust the interest rate differential in the second half of 2025, especially if global currency and trade risks materialise, FNB Namibia economists Cheryl Emvula and Helena Mboti have said.
The two economists said like other central banks managing similar uncertainties, the central bank will remain data dependent in 2025, closely monitoring global, regional, and domestic macro trends as they materialise.
The economists stated that the redemption of the Eurobond is expected to temporarily put pressure on Namibia’s foreign reserves, but this will be managed through the sinking fund to protect the currency peg.
In terms of international reserves, the economists said with the slight improvement in international reserves, FNB is of the view that the central bank remains well positioned to support financial stability and be able to intervene in the foreign exchange market when needed.
In terms of the government liquidity position, which stood at N$3.9 billion in February 2025, a significant decline of 47.8% from N$7.4 billion recorded in January, the economists said this signals possible stresses for the overall financial liquidity sector.
“Given the Eurobond redemption expected in October 2025, it is expected that this balance will be drawn down. In 2021, the redemption of the first Eurobond led to a significant drawdown on these balances, and given the larger quantity maturing at the end of the year, a similar drawdown can be expected,” they said.
Emvula and Mboti observed that the government has made provisions for this; however, any unforeseen fiscal constraints will likely put pressure on government finances.
Moreover, given the large quantity of domestic financing needs, it is likely that government finances could strain both liquidity and economic growth, the economists said.
In terms of monetary policy outlook, it was observed that the current global environment was noted as a concern as geopolitical tensions remain elevated and inflationary risks are tilted to the upside.
Emvula and Mboti said the interest rate differential with South Africa is expected to remain at 75 basis points for most of 2025, and the central bank has indicated that the margin would be narrowed over the medium term if the South African Reserve Bank continues its easing cycle or if Namibia’s international reserves come under pressure in the latter half of the year.
