The Bank of Namibia has raised alarm over the increasing household debt in the country at a time when most Namibians are eager to borrow to finance luxuries.
Statics released by the central bank last week at the announcement of the last quarter monetary policy show that debt as a share of disposable income increased from 84% at end-June 2013 to 87% by end-December 2013.
Speaking to The Villager this week, Bank of Namibia Governor, Iipumbu Shiimi gave a hint that the bank will further increase interest rates if people continue to borrow money at an uncontrollable pace. Shiimi said they are still concerned about the higher growth of credit when it comes to household.
“People are still borrowing, we see a growth in borrowing level still increasing and this is something that we are concerned and it’s something that we will continue to monitor and is something that motivated us in the past to increase interest rates. We will not hesitate like in the about past to increase interest rates if the situation continues,” he said.
Shiimi however said they are happy that the economy is growing at an average of 5% but said he hopes that the economy can have an even higher growth rate of around 7%.
“We also want the economy to grow in sectors that create employment, sectors such as agriculture, tourism, manufacturing and the logistics sector and these are the sectors that have been identified through the National Development Plan as sectors that will increase employment creation. Those are the sectors that we want to continue to drive growth. Other sectors are also important but for the purpose of employment creation, those are the sectors that we want to see growing faster. Room for improvement is there because, as a country, we need to grow faster and we all have to work hard to achieve the 7% growth,” he said.
Available data shows that domestic economy improved during the first eight months of 2014, driven mainly by construction, wholesale and retail trade, diamond mining and manufacturing. In contrast, activities in the agriculture sector, as well as uranium and zinc production performed poorly.
“The domestic economy is expected to improve during 2014, compared to 2013, supported by construction activities and strong domestic demand. The risk to growth remains low international commodity prices, due to depressed demand, which could impact negatively on export earnings, mining profits and employment,” said Shiimi.
The mining sector has been booming recently and Shiimi has now lifted the lid on what has been influencing the performances in the sector.
“It’s largely diamond production, it has done relatively well compared to where we were in the past. I think they are recovering more diamonds, the new vessels that have been acquired they are more efficient at recovering more diamonds which is good. I think they are also mining some areas where the recovery rate is faster and is efficient,” he said.
Shiimi said the annual inflation, which has been rising in the first half of 2014, slowed in recent months.
“Inflation rose steadily from 4.9% in January 2014 to 6.1% in June, before dropping to 5.3% in September. The slowdown since July was reflected mainly in food, transport and housing categories. The overall annual inflation is expected to average around 5.5% for 2014,” he said.