THE Bank of Namibia monetary committee which regulates the supply of money in the economy yesterday announced that the interest rate to be paid on loans would be reduced.
The decision has brought down the benchmarking interest rate to 3,75% from 4% – the lowest interest rates have ever been.
The effect is that the prime rate will drop from 7,75% to 7,5%.
South Africa as an important determinant of the Namibian rate is at 3,5%. This means, for investors – it is better to lend money in Namibia, than in South Africa.
In the region, Botswana has the highest rate above 4% and the rest of the Common Monetary Area member countries are all at below 4%.
Announcing the decision, central bank governor Johannes /Gawaxab said the cut was necessary to continue supporting domestic economic activity while at the same time safeguarding the one-to-one link between the Namibia dollar and the rand.
Responding to the cut, IJG Research on their Twitter account said while the cut is set to bring some further relief to borrowers, they think that this is unlikely to provide any meaningful boost to the economy as lending conditions remain risky.
On the receiving end, entrepreneur Paul Endjala said this was great time to borrow money for the right reasons.
“I hope the policy framework will reciprocate to create a conducive environment and opportunities. Every dark cloud has a silver lining, including the Covid-19 cloud,” he said.
Other economists, however, countered, saying it is a difficult time finding institutions keen to lend out money at these rates.