Namibia’s net government liquidity position improved markedly in July, climbing by NAD1.1 billion to reach NAD10.4 billion—its highest level since October 2021. This encouraging development comes amid a backdrop of steady Private Sector Credit Extension (PSCE), which held firm at 5.7% year-on-year, unchanged from June. The improved fiscal standing offers a glimmer of optimism even as the economy navigates a mix of domestic and external challenges.
The solid liquidity improvement reflects careful fiscal management and possibly better-than-expected revenue collection. However, the report from First National Bank (FNB) warns that these gains remain vulnerable. Unexpected revenue shortfalls or a sudden increase in expenditure could quickly reverse this positive trend. Of particular concern is the upcoming redemption of a NAD750 million Eurobond, which, if not managed prudently, could strain public finances and reduce available fiscal space.
Meanwhile, private sector credit growth has been largely driven by corporate borrowing, which although easing slightly from 10.6% in June to 10.1% in July, remains robust compared to the same period last year. Business overdraft credit moderated to 23.4% from 29.5%, attributed largely to repayments from firms in the manufacturing, wholesale, and retail sectors. Still, other loans and advances saw improved growth, rising to 10.5%, indicating that companies continue to seek credit for operational and expansion needs.
In contrast, household credit growth remains subdued, inching up only marginally to 2.7% from 2.4% in June. High living costs, limited housing supply, and weak purchasing power continue to restrain borrowing appetites. Mortgage credit—a traditional pillar of household debt—grew by a modest 0.8% in July, a slight improvement from June but still well below the 1.9% recorded a year earlier. Overdrafts, though still in contraction, showed some recovery as the rate of decline eased from -17.3% to -11.8%.
Notably, unsecured lending has been the primary support for household credit since early 2025. Instalment and leasing credit—often linked to vehicle purchases—grew strongly at 15.5%, though vehicle sales saw a slight monthly decline. This suggests that even with improved credit availability, underlying consumer confidence remains fragile.
The broader economic landscape presents a mixed picture. Inflation surprised on the downside in July, slowing to 3.5% year-on-year, below FNB’s forecast of 4.0%. Softer increases in food prices and subdued consumer spending were key contributors. Core inflation also eased to 3.9%, though rental and regulated service costs continued to exert upward pressure.
Transport inflation fell into negative territory at -1.2%, aided by lower fuel prices, while housing and utilities inflation declined to 3.6%, supported by improved hydropower output from Ruacana and regional energy investments. These factors provided some relief to households and businesses alike.
On the monetary policy front, the Bank of Namibia (BoN) held its repo rate steady at 6.75% in August, mirroring the South African Reserve Bank’s July cut and maintaining a 25-basis-point differential. The central bank’s decision reflects a balancing act between supporting credit growth and safeguarding macroeconomic stability.
Looking ahead, FNB expects the BoN to maintain the current policy rate through the end of the year. However, several risk factors loom. Declining Southern African Customs Union (SACU) receipts, rising import demand, subdued exports, and the impending Eurobond redemption could collectively weigh on foreign reserves and increase vulnerability to capital outflows. In a worst-case scenario, these pressures might even force the BoN to consider a pre-emptive rate hike to protect the currency and ensure financial stability.
International reserves saw a slight decline in July, falling by 2.59% to NAD58.1 billion (USD3.29 billion), due mainly to commercial banks moving South African rand into offshore accounts. Nevertheless, the BoN considers the current reserve levels adequate, covering 3.8 months of total imports and 4.3 months when excluding oil-related imports.
Broad money supply (M2) grew robustly by 10.4% in July, up from 7.6% in June, signaling healthy liquidity in the banking system. This was driven by increases in both transferable deposits and long-term deposits from corporations, governments, and households. The rise in business overdraft lending—particularly in manufacturing—aligns with stronger consumer demand and suggests firms are leveraging credit to boost production.
In summary, while the government’s improved liquidity position is a positive development, it exists within a complex economic environment. Corporate credit continues to be the engine of Namibia’s private sector lending, while household borrowing remains muted. Inflationary pressures have eased slightly, but structural constraints in housing and income continue to limit broader credit uptake.
The path ahead requires careful navigation. Fiscal authorities must balance celebration of recent liquidity gains with vigilance against emerging risks, particularly related to the Eurobond maturity. Similarly, monetary policymakers must remain alert to external vulnerabilities even as they hold rates steady. For now, Namibia’s economy shows signs of resilience—but sustaining this momentum will depend on prudent management and favourable external conditions in the months to come.