The Bank of Namibia wants to limit the spread of higher fuel costs to other prices and protect its one-to-one currency peg with the rand. The bank said the prime lending rate is now 10.50% and raised its 2026 inflation forecast.
The Bank of Namibia raised its repo rate from 6.75% to 7% in a decision announced on October 28. The 25-basis-point increase amounts to 0.25 percentage point. The Monetary Policy Committee unanimously set the rate for the next two months at its fifth regular meeting of the year on October 26–27. According to the bank’s official statement, the prime rate used by banks to price loans is now 10.50%.
How the rand peg shapes the rate decision
The Namibia dollar is pegged one-to-one to the South African rand. The committee wants to narrow the interest-rate gap between the two countries to limit potential capital outflows and protect foreign reserves. Lower Namibian rates could encourage funds to move to South Africa, putting pressure on the reserves that support the peg. The bank did not say how much capital, if any, had already left the country.
The bank’s 2023 monetary policy framework explains why small rate differences remain possible despite the peg. Transaction costs, the need to wait for fixed-term deposits to mature, capital controls and prudential rules slow the movement of funds. Namibia can therefore set a slightly different rate to respond to domestic credit and demand conditions.
The committee also wants to limit the spread of high fuel costs into prices for other goods and services. Economists call that spread a second-round effect. In its assessment ahead of the decision, the bank reported that Middle East tensions had pushed Brent crude to about $116 a barrel.
Bank raises its inflation forecasts
Annual consumer-price inflation rose from 4.4% in June to 5.4% in September. Inflation averaged 3.8% over January–September, up from 3.6% in the same period last year. The bank says transport prices rising faster were the main source of inflation pressure.
Assuming a longer energy-price shock, the bank raised its inflation forecast by 0.2 percentage point for 2026 and 0.1 percentage point for 2027. Those full-year projections cover a different period from September’s annual inflation reading.
| Indicator | 2025 | 2026 forecast | 2027 forecast |
|---|---|---|---|
| Full-year inflation | 3.5% | 4.2% | 4.0% |
| Economic growth | 1.7% | 2.1% | 2.8% |
Recoveries in agriculture and manufacturing are expected to support growth, although the bank says economic activity will remain under pressure. It says an outbreak of foot-and-mouth disease, which it had warned about, is now weighing on the economy. The bank warns that weak global growth and possible El Niño conditions could also leave Namibia’s growth below its forecasts.
How the increase affects borrowing costs
Commercial banks pay the repo rate set by the committee when they borrow through the central bank’s seven-day facility. Under the 2023 framework, they must provide eligible collateral. The central bank uses repos to meet banks’ short-term payment and liquidity needs; the facilities are not intended to finance their lending to customers directly.
When commercial banks raise lending rates, households and companies face higher borrowing costs. The central bank explains in its 2023 framework that households paying more mortgage interest have less money available for other spending. The interest a customer pays on a loan or receives on a deposit depends on their contract; prime does not set one customer rate for every product. The bank did not announce new repayment amounts for individual products.
Private-sector credit grew by 5.4% year over year in August. Growth accelerated by 0.9 percentage point from June’s 4.5%, as both companies and households borrowed more. However, average credit growth over the first eight months remained below the corresponding period of 2025.
Reserves rise as the trade deficit widens
The merchandise trade deficit widened from N$17.8 billion in January–August 2025 to N$33.5 billion in the same period of 2026. The bank points particularly to increased mineral-fuel imports amid higher energy prices. The amounts are in Namibia dollars. The goods-trade calculation excludes services and other income flows included in the current account.
International reserves rose from N$58 billion at the end of July to N$59.3 billion at the end of September. The bank mainly attributes the increase to gold held in reserves and foreign currency deposited by customers. It estimates import cover at 3.6 months and considers reserves sufficient to support the peg and the country’s international financial obligations. Import cover compares the size of reserves with import needs; it is not a countdown to the reserves running out.
The committee next meets on December 7–8, 2026. It has not announced a rate for December.
The bank’s official October 28 monetary policy press conference is listed in its YouTube live-stream archive.
The central bank’s decision announcement and graphic, posted on October 28 at 09:06 UTC:
