In a move to breathe life into its slowing economy, the Bank of Namibia has reduced its benchmark repo rate by 25 basis points to 6.50 percent, marking the country’s first policy easing of the year. The decision, announced after the Monetary Policy Committee (MPC) meeting, reflects the central bank’s effort to bolster domestic demand while preserving the delicate peg between the Namibia Dollar and the South African Rand.
Governor Dr. Johannes !Gawaxab noted that the reduction was necessary to “support domestic economic activity while safeguarding the one-to-one link between the Namibia Dollar and the South African Rand.” The accompanying drop in commercial banks’ prime lending rate to 10.125 percent is expected to lower borrowing costs and spur private sector credit growth, especially among struggling businesses.
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Namibia’s economy has slowed more sharply than expected. The real GDP growth rate fell to 1.6 percent year-on-year in the second quarter of 2025, down from 3.3 percent in the same period of 2024, reaching a post-pandemic low, according to the central bank’s report. The downturn is most pronounced in the manufacturing, fishing, and agriculture sectors, reflecting a combination of weak external demand and climatic disruptions.
The Bank of Namibia projects that overall economic growth for 2025 will decline from the 3.7 percent recorded in 2024, with “downside risks now more pronounced.” The latest high-frequency indicators paint a similarly dim picture, showing that economic activity in the first eight months of 2025 slowed relative to last year.
Despite the slowdown, inflation has remained subdued. Annual inflation averaged 3.6 percent during the first eight months of 2025, compared to 4.6 percent in the same period of 2024. The moderation was largely due to lower housing and transport costs and a stronger Namibian Dollar against major currencies.
In September 2025, consumer price inflation stood at 3.5 percent, largely unchanged since July. The central bank revised its inflation outlook slightly downward to 3.6 percent for 2025 and 4.0 percent for 2026, citing a firmer exchange rate and lower oil price assumptions. However, the Bank remains cautious about potential risks from global energy price volatility and exchange rate fluctuations.
Credit Reawakens as Households Lag Behind
There are tentative signs of recovery in private sector credit extension (PSCE), which rose to a post-pandemic high of 5.8 percent in August 2025, compared to 5.7 percent in June. Average growth in credit for the first eight months of the year stood at 4.9 percent, more than double the 2.0 percent recorded over the same period in 2024.
This improvement has been mainly driven by increased borrowing from businesses rather than households, underscoring the uneven nature of Namibia’s post-pandemic recovery. While firms are cautiously expanding operations, household credit demand remains constrained by high living costs and slow income growth.
The Trade Winds Shift
Namibia’s merchandise trade deficit narrowed by 16.1 percent to N$17.9 billion during the first eight months of 2025, a marked improvement from the same period in 2024. The central bank attributes this to a surge in export earnings — particularly from uranium and gold — which have benefitted from robust global prices, even as imports rose moderately.
Meanwhile, international reserves declined to N$54.7 billion as of September 2025, down from N$58.1 billion in July, reflecting elevated import payments and foreign obligations. The reserves are nonetheless sufficient to cover 3.6 months of imports, a level the Bank considers “adequate to sustain the currency peg and meet the country’s external obligations.”
Namibia’s policy decision comes at a time when the global monetary environment is shifting. The US Federal Reserve implemented its first rate cut of the year, while most other major central banks have held their rates steady amid diverging inflation trends. According to the International Monetary Fund (IMF), global growth is expected to moderate slightly from 3.3 percent in 2024 to 3.2 percent in 2025, before easing further to 3.1 percent in 2026.
Commodity prices have been volatile: gold and uranium prices have reached multi-year highs, zinc remains elevated due to tight supply, while crude oil has softened on the back of rising inventories and trade tensions. These global dynamics feed directly into Namibia’s small, open economy, influencing both its export performance and inflation outlook.
The Policy Tightrope
The Bank of Namibia’s easing comes despite a widening interest rate gap between Namibia and South Africa, its anchor country in the Common Monetary Area (CMA). However, the MPC concluded that the magnitude of this divergence “falls within acceptable limits where capital movements remain well-contained.”
The Bank also expressed confidence that the forthcoming Eurobond redemption will not jeopardise foreign reserve adequacy, noting that “thorough preparation has ensured that Namibia’s financial stability remains intact.”
A Measured Step Toward Recovery
By lowering the repo rate, Namibia joins a handful of emerging economies cautiously easing monetary policy to counter tepid growth. The move aims to support investment and consumption while preserving macroeconomic stability. Yet, the Bank remains vigilant, aware that the room for further easing is limited if external shocks intensify or inflation surprises on the upside.
The next MPC meeting is scheduled for 1–2 December 2025, when policymakers will again weigh the balance between supporting growth and defending the exchange rate peg. For now, the decision marks a calculated step toward sustaining the country’s economic momentum amid an uncertain global landscape.
