|September 11, 2003
Central Bank cuts interest rates
The Bank of Namibia yesterday cut the rate at which it lends to commercial banks from 10,75 to 9,75 per cent, following a one per cent cut in the South African Reserve Bank's repo rate. "It is envisaged that the cut in the Bank rate will lead to a reduction in the cost of borrowing from commercial banks, which will inevitably further boost business confidence and enhance growth in the domestic economy," Bank of Namibia Governor Tom Alweendo said in a press statement. The decision to cut rates was because of the need to align domestic rates with those in the Common Monetary Area, Alweendo said.
Commentators in the business world welcomed the news. Chairperson of the economics standing committee of the Namibia Chamber of Commerce and Industry (NCCI), Rainer Ritter, said the announcement was "positive". Although markets expected rates to be cut again this year, few had expected them to fall so suddenly, Ritter said. "It shows the SA government wants to stimulate the economy, and it should also filter through to our economy if local banks also cut their rates," he said.
"All economic indicators were in place for such a cut," said Johannes !Gawaxab, Chief Executive of Old Mutual Namibia. He added that the cut meant "cash in the bank" was no longer such a good investment for savers. They should, he said, now consider equities in order to get good returns.
A senior researcher at the Namibian Economic Policy Research Unit (Nepru), Tekaligne Godana, said he expected further rate cuts before the end of the year. "We are probably looking at another two per cent reduction if nothing radical happens, such as the rand weakening seriously," he said. He added, however, that currency markets had expected rate cuts, and it was unlikely the decision would cause the Namibia dollar to weaken much against the US dollar.
The Namibian and South African central banks raised interest rates four times last year in an attempt to slow down spiralling price hikes throughout the region, which were caused by the rand falling to record lows against the US dollar in late 2001. (The Namibian, Windhoek)