The Bank of Namibia has kept its benchmark repo rate unchanged at 6.75 percent, maintaining a cautious monetary policy stance as the economy faces subdued domestic activity, rising inflationary pressures and the need to preserve the country’s currency arrangement with South Africa.
The decision was taken unanimously by the Bank of Namibia’s Monetary Policy Committee following its meeting on 10 and 11 August. The central bank said the rate was appropriate given the need to support foreign exchange reserves and safeguard the one to one link between the Namibia dollar and the South African rand. The prime lending rate was also maintained at 10.25 percent.
The decision comes after the central bank raised the repo rate by 25 basis points to 6.75 percent in June, its first increase in three years. The August decision therefore leaves the higher rate in place while policymakers assess the competing pressures facing the economy.
Namibia’s economic performance during the first half of 2026 remained uneven. According to the Bank of Namibia, high frequency indicators pointed to sluggish activity across several important sectors, including mining, manufacturing, electricity generation and transport. Agriculture, as well as wholesale and retail trade, recorded improved activity during the period.
The central bank has consequently revised down its growth projection for 2026. Economic growth is now expected to reach 2.1 percent, compared with an earlier projection that was 0.5 percentage points higher. The revised outlook represents an improvement from the 1.7 percent recorded in 2025, although the pace of recovery remains modest. The Bank identified slower global growth, foot and mouth disease outbreaks in neighbouring countries and the possibility of El Niño conditions as risks to the outlook.
Inflation, meanwhile, has moved higher. Annual headline inflation increased to 4.4 percent in June from 4.1 percent in May, with transport costs identified as the principal driver. Despite the June increase, inflation averaged 3.2 percent during the first half of the year, below the 3.6 percent recorded over the same period in 2025, largely because of lower food price inflation. The Bank expects inflation to average 4.0 percent in 2026, compared with 3.5 percent in 2025.
The decision also reflects the particular monetary policy considerations created by Namibia’s currency arrangement. The Namibia dollar is maintained at parity with the South African rand, meaning that the Bank of Namibia must consider interest rate differentials, capital movements and foreign exchange reserves alongside domestic economic conditions.
The Bank said the Monetary Policy Committee considered the need to narrow the interest rate differential with South Africa in order to limit potential capital outflows. At the same time, it assessed inflationary pressures, subdued economic activity and the adequacy of foreign exchange reserves before deciding against another rate adjustment.
Credit conditions also point to a relatively cautious domestic environment. Growth in private sector credit extension slowed to 4.5 percent in June, with the Bank attributing the moderation primarily to lower credit uptake by businesses. Household credit increased during the period, although overall private sector credit growth during the first half of 2026 was marginally below the corresponding period of 2025.
The external position presents another consideration for policymakers. Namibia’s merchandise trade deficit widened to N$19.3 billion during the first six months of 2026, compared with N$12.8 billion over the same period in 2025. The deterioration was largely associated with higher import payments, particularly for mineral fuels. The Bank also warned that elevated import prices, together with weakness in the diamond and gold subsectors, could place additional pressure on the external position in the near term. (Bon)
At the same time, Namibia’s reserve position has provided some room for monetary stability. Preliminary international reserves increased to N$57.1 billion at the end of July from N$55.4 billion at the end of May. The Bank attributed the increase partly to receipts from the Southern African Customs Union and customer foreign currency placements. At the July level, reserves represented an estimated 3.5 months of import cover, which the central bank considers sufficient to support the currency peg and meet Namibia’s international financial obligations. (Bon)
The decision illustrates the policy trade offs confronting a number of African economies where monetary stability, external financing conditions and domestic growth objectives intersect. For Namibia, the policy challenge is particularly shaped by its close financial and monetary relationship with South Africa, while the structure of its economy leaves domestic activity exposed to developments in commodity markets, energy costs, trade conditions and agricultural performance.
The Bank of Namibia’s latest assessment therefore presents neither an economy in broad contraction nor one experiencing a strong and evenly distributed recovery. Instead, the available indicators point towards a gradual recovery constrained by weak performance in several productive sectors, higher transport related inflation and a widening trade deficit, alongside an improving reserve position and stronger activity in agriculture and domestic trade.
For households and businesses, the unchanged repo rate means that borrowing conditions will remain broadly stable in the immediate term, although the cost of credit remains materially higher than it was before the rate increase in June. For policymakers, the decision preserves monetary stability while allowing further assessment of whether the economy can absorb existing inflationary and external pressures without additional tightening.
The next meeting of the Bank of Namibia’s Monetary Policy Committee is scheduled for 26 and 27 October 2026.
