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Nam not considering delinking currency from Rand

Mon, 9 March 2015 07:22
by Patrick Haingura
News Flash

The central bank will indefinitely keep the value of the Namibian dollar linked to the South African Rand as the move has seen the country benefiting immensely despite costs associated with it.
Central Bank’s, Director of Strategic Communications and Financial Sector Development, Ndangi Katoma revealed this week that Namibia intends to remain in this arrangement due to the array of benefits and highlighted important factors such as high inflation and transaction cost payments.
"Inflation in Namibia is generally lower than the average inflation in Sub Saharan Africa. This benefit is attributed to the fact that through fixing the Namibia Dollar to the Rand, Namibia imports low and stable prices from South Africa. Hence delinking could compromise this benefit and lead to high inflation," said Katoma.
He said presently Namibians who import goods from South Africa are exempted from paying transaction cost which would have been required if the Namibia Dollar was not linked to the Rand.  
"Imports from South Africa are presently less expensive than they might be if the Namibia Dollar was delinked. This benefit could go away if Namibia was to delink from the Rand. The fact that about 65% of goods consumed in Namibia are imported from South Africa implies that Namibians would incur transaction costs in the process of importing these goods," he said.
The main of cost associated with fixed exchange rate regime, Katoma said, is the fact that Namibia’s monetary policy autonomy is constrained in the sense that it should be closely aligned to that of South Africa.
"Namibia is in this arrangement due all these economic benefits, the option for Namibia to delink is always there but this will be considered only if the price stability objectives of Namibia are compromised," said Katoma.
He added that the Namibian Government does not intend to change the current fixed exchange arrangement despite the need for member countries’ adjustment to economic shocks in recent years and the inter-country linkages, including the spillover effects of policies.
There have been some notable key policy challenges, issues facing both South Africa and Namibia in their efforts to achieve sustained growth and implications for further economic integration in a broader regional context. The economic and social developments have remained uneven between South Africa and Namibia.
Africa is home to most of the fixed currency countries at 19, with 14 of them using the CFA franc that is pegged to the Euro and three pegged to the South African Rand (ZAR) as part of a Common Monetary Area.
Latest information on currencies that are pegged suggest that the EUR has (17 total), with the USD coming second (13 total). Many of the currencies pegged with the Euro are themselves in a monetary union, pegged to another monetary union.
Africa is home to most of the fixed currency countries at 19, with 14 of them using the CFA franc that is pegged to the Euro and three pegged to the South African Rand (ZAR) as part of a Common Monetary Area.