Windhoek — AT 15,25 per cent, the lending rate of commercial banks is too high and must be adjusted, the Deputy Governor of the Bank of Namibia said in Windhoek yesterday.

Delivering the first monetary policy statement of the year, BoN Deputy Governor Paul Hartmann said the central bank committee had decided to keep the bank rate steady at 10,5 per cent.

Hartmann called on commercial banks to revisit their rates and adjust the prime lending rate.

He quickly added that commercial banks had to bridge the gap between the bank rate and the prime lending rate.

"The bank (BoN) views it as undesirable that the differential between the bank rate (10,5 per cent) and the prime rate of commercial banks (15,25 per cent) remains substantial, despite the fact that the bank rate is 50 basis points lower than that of the South African repo rate," said Hartmann.

According to the Central Bank, so far this year the Namibian economy has been sound and supportive of the current monetary policy stance, hence the decision.

The country's international reserves position, said Hartmann, was at a 'comfortable' level of N$7,8 billion compared to N$2,93 billion of 2006.

The reserves were buoyed by favourable commodity prices and strong Sacu receipts.

Hartmann explained this meant that the current amount was more than enough to meet the country's short-term external liabilities and to cover more than three months of imports.

However, Hartmann said there were a number of factors which posed risks to the positive economic standing.

These included rising inflation, the shortage of power supply and volatile international crude oil prices.

He added that the BoN was also concerned about the major uncertainties on the global economic front - stemming from ongoing turmoil in the financial markets - that could have an unwelcome impact on the local economy.

Inflation has been on the increase since the end of last year, from 6,6 per cent in October, to 6,9 per cent in November ending up at 7,1 per cent in December.

This was attributed to annual transport inflation and the ever rising food price inflation.

"On balance therefore, it appears as if an increase in the bank rate at this stage could run the risk of unduly depressing already slowing domestic demand, which may hinder real sector growth, especially in view of the regional power shortages that will impact negatively on production."