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Analysts welcome unchanged repo-rate

26/10/2017
by Kelvin Chiringa
Business

The Monetary Policy Committee of the central bank’s decision to keep the repo rate untouched for now at 6.75 % has been hailed by local analysts as a wise move despite pressure on the indebted consumer.

Simonis Storm Securities had earlier advised that the rate should be cut to allow for some breathing in the subdued economy yet the firm says for now the move is laudable due to uncertainties in South Africa.

“I think now they kept it on hold due to uncertainties as to what will happen to South Africa, what will happen to the Rand. We have also seen it spiking to about R13.99 now. 

"We have the Swapo election as well in November, so all those things are coming into play, keeping it flat for now is a wise decision to do, but then we still expect a cut before the year ends which is now the 6th of December,” says trainee economist Indileni Nanghonga.

While cutting rates would probably be the most likely option going forward, IJG Securities’ head of research Eric van Zyl says that however, that would be depended on the South African Reserve Bank (SARB) cutting rates.

“We run the risk of having capital outflows to South Africa and that obviously puts pressure on our international reserves, and at times like these we need the capital to stay in the country,” he says.

 As at 30th of September 2017, the official stock of international reserves stood at M$31.5 billion representing an increase both on an annual and monthly basis. 

This increase has been credited to higher SACU receipts, payments from Angola and the African Development Bank (AfDB) loan.

The stock is estimated to cover 5.1 months of imports of goods and services, sufficient to sustain the Rand/N$ peg.

The currency peg between South Africa and Namibia has been the determinant to the decision by the central bank, van Zyl says, and Namibia would not want to be seen going below. 

“We are largely reliant on what the south does for rate cuts, so we weren’t going to cut rates because SARB kept their rates on hold. 

"And considering the current economic conditions, I don’t think it would be the right thing to hike rates with PSCE coming down or growth coming down,” he says.