CHAMWE KAIRA
The Bank of Namibia (BoN) has kept its repo rate unchanged at 6.75%, in line with expectations, while maintaining the prime lending rate at 10.50%.
The decision follows the central bank’s 25-basis-point rate increase in June, which was implemented ahead of the South African Reserve Bank (SARB) to protect the interest-rate differential supporting the Namibia dollar’s peg to the South African rand.
Simonis Storm said the decision marked the first pause since the June increase and was consistent with its expectations ahead of the monetary policy announcement.
According to the research firm, the decision to hold was supported less by the headline inflation rate and more by the composition of price increases.
Namibia’s annual inflation accelerated to 4.4% in June 2026, its fastest pace since August 2024, but Simonis Storm said much of the increase was concentrated in transport and fuel, which rose by nearly 13% year-on-year. Core inflation, meanwhile, remained considerably lower at 3.3%.
July inflation remained unchanged at 4.4%, although the impact of the 5 August fuel price increase and a 3.7% electricity tariff increase from NamPower is expected to feed into inflation in coming months.
Simonis Storm said the rate hold means borrowing costs for households and businesses will remain unchanged, providing no additional relief but also avoiding further tightening.
For households with variable-rate mortgages, vehicle finance and other credit, monthly instalments therefore remain unchanged.
However, the research firm cautioned that the decision does not reverse the impact of already higher fuel, electricity and municipal costs.
“Even with today’s hold, households are absorbing a wave of cost increases,” Simonis Storm said, pointing to a N$2 per litre increase in fuel prices from 5 August, electricity tariffs rising by 3.7% and municipal rates increasing by about 4%.
The research firm also highlighted signs of increasing pressure on household finances in private-sector credit data.
Private-sector credit extension increased by 4.5% year-on-year in June, but household overdraft balances rose by 12.5%, compared with 5.8% in May.
Corporate overdraft growth, by contrast, slowed to 2.2% as businesses reduced their use of short-term borrowing and repaid debt.
Simonis Storm said the increase in household overdraft borrowing was consistent with households using credit to manage rising living costs rather than cutting spending.
The research firm estimates that monetary policy is already restrictive, with the real repo rate at about 2.4% when measured against headline inflation and approximately 3.5% against core inflation.
However, Simonis Storm has revised its outlook and now expects the BoN to raise the repo rate by another 25 basis points to 7.00% at its 28 October meeting.
The forecast is based on three main factors: expectations that the SARB will raise its rate at its 23 September meeting, rising inflation following fuel and electricity price increases, and the BoN’s focus on maintaining the interest-rate differential and protecting the currency peg.
Simonis Storm expects the August and September inflation figures to push headline inflation closer to 5%, compared with its 4.5% to 5% average inflation forecast for 2026.
The research firm nevertheless expects the October increase to be a once-off adjustment rather than the beginning of a renewed tightening cycle.
It expects the BoN to maintain a 7% repo rate through the remainder of 2026 and into 2027, provided there are no further external shocks.
