The Bank of Namibia has set a target to purchase 600kg of gold from local mining companies under its gold accumulation programme. This initiative is part of the central bank's strategy to diversify the country's foreign exchange reserves and strengthen economic stability amid global uncertainty. Deputy governor Nicholas Mukasa revealed that the central bank has so far purchased 425kg of gold from local mines.
According to Mukasa, the gold accumulation programme has contributed significantly to the increase in foreign reserves between the two Monetary Policy Committee (MPC) meetings. The programme aims to complement other assets traditionally held in the central bank's reserves, making it useful for diversification. Gold is seen as a valuable asset that does not tend to move in tandem with other traditional reserve assets.
The central bank launched its gold accumulation strategy last year, and it has already shown positive results. Namibia's international reserves rose to N$59.3 billion at the end of September from N$58 billion at the end of July. The level of reserves translates into an estimated import cover of 3.6 months and remains sufficient to support the currency peg and meet the country's international financial obligations.
The Bank of Namibia's decision to accumulate gold is also driven by the need to hedge against potential risks in the global economy. The central bank noted that key commodity prices had remained elevated since the August MPC meeting, with crude oil prices recently surging above US$100 per barrel. This increase is mainly due to heightened tensions in the Middle East.
On Wednesday, the Bank of Namibia increased the repo rate by 25 basis points to 7%. Governor Ebson Uanguta said domestic economic activity was projected to remain subdued, while inflation continued to face upward pressure. The bank also noted that growth in private sector credit extension (PSCE) increased, while the trade deficit widened further.
The Namibian economy is expected to remain under pressure as previously identified risks materialise, particularly the outbreak of foot-and-mouth disease (FMD). Nevertheless, economic growth is projected to improve from 1.7% in 2025 to 2.1% in 2026 and 2.8% in 2027, supported by recoveries in the agriculture and manufacturing sectors.
Domestic inflationary pressures have persisted, disrupting the disinflation trend observed up to March this year. Going forward, domestic prices are expected to remain elevated, with headline inflation projected to rise from 3.5% in 2025 to 4.2% in 2026 before easing slightly to 4% in 2027. The Bank of Namibia will continue to monitor the economic situation and adjust its monetary policy stance as needed.
Key points
- The Bank of Namibia aims to buy 600kg of gold from local mining companies to diversify foreign exchange reserves.
- The central bank has so far purchased 425kg of gold from local mines under its gold accumulation programme.
- Namibia's international reserves rose to N$59.3 billion at the end of September from N$58 billion at the end of July.
