Loose monetary and fiscal policy blamed for Namibia liquidity crisis

Loose monetary and fiscal policy and the major withdrawal in hard currency from the Namibian economy are the likely primary and underlying causes of the current liquidity crisis, a leading economist has said.


Rowland Brown, who is with a research firm IJG Securities, said this after a Bank of Namibia deputy governor, Ebson Uanguta, revealed that they are sitting with 38 billion kwanza (2.8 billion Namibian dollars or 208 million U.S. dollars).


The Bank of Namibia and the Banco Nacional De Angola signed a currency swap agreement which came into effect in June this year that allows traders from both countries to use their currencies to do business at the Oshikango border post only.

Brown said this has not been the case because some Angolans have brought in billions of the kwanza which they changed into Namibian dollars between June and August and taken to Angola.

According to Rowland, this happened when oil prices had fell by about 50 percent between June 2014 and June 2015. Oil is Angola’s economic mainstay.

“This has meant that the Banco Nacional De Angola is unlikely to have sufficient hard currency in US dollars to exchange for the 2.8 billion Namibian dollars worth of Kwanza currently sitting in Namibia,” Rowland said.

The economist said by the end of August this year, Namibia had 4.26 billion Namibian dollars in circulation.
He further said if the Angolans are holding 2.8 billion Namibian dollars, this translates into more than 66 percent of the country’s total currency circulation.

Interestingly, Rowland said, this kwanza development comes at the same time as Namibia is scrambling to raise a hard-currency Eurobond to protect the country’s external position.

“Namibia, as part of the common monetary area must meet a clause that stipulates that Namibia must hold sufficient hard currency reserves to cover currency in circulation,” he further said.

Namibia’s finance minister Calle Schlettwein is currently in the U.S. for the launch of a 750 million U.S dollar 10-year eurobond. Enditem

Source: Xinhua

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