13 December 2012

Namibia: Brakes On Instalment Credit Welcomed By Bank of Namibia

NAMIBIANS seemingly putting the brakes on instalment credit warmed the Bank of Namibia’s heart, and helped in the central bank’s decision yesterday to keep interest rates unchanged.

BoN Deputy Governor Ebson Uanguta kept the repo rate at 5,5%.

Annual growth in instalment credit decreased from 19,5% in September to 15,2% in October, a “significant” drop, Uanguta said.

“If this trend is sustained, it could help to stabilise the high levels of indebtedness of individuals in the near to medium term,” he said.

Annual instalment credit growth of 20% and more earlier this year raised the hackles of the BoN, with Governor Ipumbu Shiimi threatening to “look into the BoN’s toolkit” if consumers don’t stop buying “less productive” assets on credit. Pushing up interest rates would be an option, he said at the time.

Uanguta yesterday said the BoN would like to see the trend of slower instalment credit growth to continue in the future.

The BoN also decided to keep its repo unchanged to support Namibia’s economic growth.

“Notwithstanding positive signs locally, Namibia remains an open economy, and as such is exposed to the uncertainties and vulnerabilities that have buffeted the global economy.

“It is therefore against this backdrop that the Monetary Policy committee continues to hold the view that the current low interest rate environment should be maintained in order to ensure that growth is supported in the local economy going forward,” Uanguta said.

The favourable interest rate environment is paying off in the business sector, he said.

Credit extended to the private sector in October grew by 16,6% on an annual basis – the highest in five-and-a-half years. Uanguta said the growth was driven by credit extended to the business sector, which increased by 21,1% year-on-year.

Growth in credit to individuals remained “elevated” at 14% year-on-year in October, but was marginally slower than the 14,7% the month before.

Uanguta said low rates would also further help to “mitigate, as far as possible, the impact of the slowdown in growth” seen in many of Namibia’s trading partners.

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