11 April 2008
Windhoek — The Bank of Namibia (BoN) reported that the annual rate of inflation has increased moderately from 7.8 percent in January to 7.9 percent in February, with the main drivers being food and transport's soaring prices.
There has also been a sharp jump in education inflation to 16 percent in February, compared to the same period last year. This the Bank ascribed to the annual adjustment of school fees.
Demand for credit extension and vehicle sales have subdued.
Growth in credit extended to individuals slowed to 9.2 percent at the end of February from 17.3 percent in the corresponding period last year.
However, credit extended to businesses has seen an increase to 15 percent compared to 12.4 percent last year.
Growth in mortgage loans, which accounts for the bulk of private sector credit, decelerated from 27.7 percent to 12.6 percent.
The Bank reported that motor sales have decelerated to 4.3 percent from 12.5 percent at the end of February last year due to the tight monetary policy.
Inflation is likely to increase due to the high fuel prices.
"The South African Producer Price Index (PPI), which is a leading indicator for future imported inflation for Namibia, is expected to continue its upward trend as fuel prices and electricity tariffs in South Africa increase, thus raising the cost of production," said BoN Governor, Tom Alweendo.
Local administered prices are also expected to increase as a result of an anticipated rise in municipal rates and taxes, and electricity tariffs.
In general, however, the Bank said the economic conditions remain "sound" with favourable commodity prices and strong Southern African Customs Union (SACU) receipts, while the external current account remains robust.
Namibia's international reserves position is at a "comfortable position" of N$10,2 billion, BoN said, which is "more than adequate" to meet the country's short-term external liabilities and to cover more than three months of imports.
The Bank has also decided to keep the bank rate unchanged at 10.5 percent per annum.
BoN expressed concern over the inflationary risks due to increases in administered prices, high crude oil prices and high food prices.
It also expressed worry over the uncertainties in the global economic outlook and the potential impact on the Namibian economy.
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