The Bank of Namibia has in the past two monetary policies hiked interest rate by 0.25 bases consecutively in a bid to reign in uncontrolled borrowing.
According to the central bank’s chief, Namibians have been on a borrowing spree to finance non productive commodities. Surveys have shown that most Namibians are eager to get their hands on the imported cars from Botswana and the United Kingdom.
The interest rate hikes by Shiimi have also put immense pressure on commercial banks that in turn increased their lending rates to their clients.
Within the past 6 months the country’s top 4 banking institutions including Standard Bank Namibia, Bank Windhoek, First National Bank Namibia also responded by hiking their lending rates albeit by a reasonable margin. However what many might not read between the lines is that Shiimi’s raft of measures to cut down on uncontrolled borrowing is making life difficult for loan seekers because it means the bulk of Namibians will not afford to borrow money from the bank to finance housing loans.
While Shiimi’s move to adjust interest rates is welcome as it saves many Namibians money by staying away from borrowing, it makes lives even more difficult for those that are already overburdened by loans and mortgages.
There are also challenges emanating from the fact that it took the central bank quite some time to respond to the high borrowing despite analysts urging them to adjust their rates. The Governor’s argument the year through has been that there was no need for a knee jerk reaction that would increase rates in tandem with South African movements. However what the governor does not say is why now and when will the rate hike end. There is already speculation that the central bank might have adopted a stance where interest rates will be adjusted slowly until the end of the year. Should this be true then there is definitely tough challenges for those who live in debt and perhaps they need deliverance from Shiimi.
It is reasonable that the central bank is eager to create a sense of responsibility in the average Namibian but increasing interest rates consecutively towards a festive season raises eyes brows and challenges to the poor.
The central bank could have taken a gradual approach in addressing their repo rate increases within the year than creating a heavy burden on Namibians. It is also challenging to note that while Shiimi was under pressure to increase his repo rate earlier in the year with South Africa which is in the same common monetary area with Namibia, he decided not to take the opportunity.
There should be a balance for the monetary authorities when they take a decision to adjust their repo rate which in turn also increases lending rates. The bulk of Namibians buys houses through the banks and is indebted. However for those that are already sinking in debt it is understandable but the first time house buyers will find it difficult to engage banks for assistance to buy properties as borrowing is now very expensive.