Overall
Private sector credit (PSCE) rose by N$300.7 million or 0.29% m/m in June, bringing the cumulative credit outstanding to N$105.31 billion. On a year-on-year basis, private sector credit grew by 2.55% in June, compared to the 2.66% y/y growth recorded in May. On a rolling 12-month basis, N$2.62 billion worth of credit was extended to the private sector. N$2.38 billion worth of credit has been extended to individuals over the past 12 months, while N$334.5 million was issued to corporates. The non-resident private sector decreased their borrowings by N$94.1 million.
Credit Extension to Individuals
Credit extended to individuals increased by 0.4% m/m and 4.04% y/y in June, growing at a slightly quicker pace than the 3.98% y/y increase recorded in May. The month-on-month growth has mostly been driven by an increase in Mortgage loans by individuals which rose by 0.3% m/m and 4.9% y/y. Instalment credit increased by 3.2% m/m and 1.0% y/y, the third consecutive month of increase on an annual basis. Overdraft facilities extended to individuals contracted by 0.9% m/m, but increased by 5.0% y/y. Other loans and advances (OLA) rose by 0.8% m/m and 2.3% y/y.
Credit Extension to Corporates
Credit extension to corporates grew by 0.4% m/m, following four consecutive months of declines. On an annual basis, growth in credit extension to corporates decelerated to 0.8 % y/y in June, compared to the 1.2% y/y growth registered in May. On a monthly basis, mortgage loans and other loans and advances (OLA) rose by 0.4% and 0.2% respectively. Overdraft facilities extended to corporates contracted by 4.6% m/m. On a year-on-year basis, OLA contracted 2.4%, while mortgage loans and overdrafts increased 0.8% and 5.7%, respectively.
Banking Sector Liquidity
The overall liquidity position of commercial banks improved during June, increasing by N$213.4 million to reach an average of N$554.3 million. The BoN attributed the diminishing liquidity position to net transfers by investment managers as well as several cross-border transfers during the period under review. The outstanding balance of repo’s subsequently rose to N$1.7 billion at the last week of the month.
Reserves and Money Supply
As per the BoN’s latest money statistics release, broad money supply contracted by N$2.53 billion or 2.0% y/y in in June, compared to the 1.3% y/y decrease recorded in May. Foreign reserve balances increased by N$2.8 billion to N$41.8 billion in June. The BoN ascribed the increase in official reserve stock to the inflow of the AfDB loan and the IMF Rapid Financing Instrument (RFI) during the period under review.
Outlook
Mortgage loans by corporates recorded positive year-on-year growth for the first time in 15 months, while overdrafts decelerated to single digits for the first time in 8 months. IJG expects the BoN to leave the repo rate unchanged at the current historically low level until the end of the year, assuming that the inflation forecast for both Namibia and South Africa remains unchanged. This should continue to assist over-indebted individuals and businesses, but as we’ve pointed out in the past, will likely not lead to significant additional credit uptake unless the economic outlook improves meaningfully.