Namibia is benefiting from a currency peg with South Africa’s rand, even after it slumped 6 percent against the dollar in the past six months, central bank Governor Ipumbu Shiimi said.
The nation has no plans to decouple the Namibian dollar from the rand, Shiimi told reporters today in the capital, Windhoek.
“The rand is weakening, yes, but to a large extent this is not because of domestic factors,” he said. “We still believe that the South African economy is still well managed.” The currency arrangement “benefits us more than them,” he said.
The rand has come under pressure since last year as economic growth slowed and the U.S. Federal Reserve scaled back its monetary stimulus that’s helped to fuel inflows into emerging markets. The currency fell as much as 0.9 percent to 10.9728 against the dollar today.
“With this current exchange rate arrangement we are achieving our objectives,” Shiimi said. “The depreciation in the currency is hurting importers more than exporters but there will always be winners and losers.”
Namibia’s international reserves climbed 16 percent to 18.2 billion Namibian dollars ($1.7 billion) by the end of January compared with the previous month and are still “sufficient to support the fixed exchange rate,” the governor said.
While the Bank of Namibia generally follows monetary policy set by the South African Reserve Bank, Shiimi today kept the benchmark interest rate unchanged at 5.5 percent, while policy makers in the neighboring country on Jan. 29 raised the rate for the first time in more than five years. South Africa’s benchmark rate is now on par with Namibia.
Economic growth is forecast to accelerate to 5.3 percent this year from about 4 percent last year, buoyed by “high growth in the construction sector, mining and strong consumer demand,” Shiimi said. Inflation will probably average 6 percent this year, he said.
“The prospects for 2014 remain encouraging with improved economic growth and sustained low inflation,” he said.
Namibia, located on the southwest coast of Africa, is the world’s biggest offshore diamond miner and the fourth-largest uranium producer.
The central bank is considering measures to reduce growth in credit demand, imports of non-productive goods and over-indebtedness, Shiimi said. Growth in borrowing by households and businesses eased to 14.3 percent in December from 17 percent a year earlier.
“The idea is to make new credit expensive for individuals,” he said. “We want people to borrow when they are able to afford the credit.”
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