Namibia's central bank raised its benchmark repo rate by another 25 basis points to 6.25 percent, noting its continuing concern over the high growth in credit to households that is being used for "unproductive goods," such as cars and other luxury goods.
The Bank of Namibia, which already raised its rate by 50 basis points in 2014 in an attempt to cool the import of luxury goods, also said preliminary data showed a widening trade deficit in 2014 as a result of higher imports of goods that will not benefit the economy in the future.
Namibia's foreign exchange reserves declined by an annual 13.7 percent to 16.0 billion Namibian dollars at the end of January, mainly due to the higher import bill.
However, despite this pressure, the central bank said its reserves are adequate to maintain the one-to-one link with South Africa's rand currency.
Total credit to the private sector rose by N$9.7 billion in 2014 from an increase of N$7.4 billion in 2013, with more than half of the credit extended to households. The central bank is particularly concerned about a 23.8 percent jump in overdrafts and a 18.9 percent rise in installment credit over the last six months.
Namibia's economy is expected to expand by 5.6 percent this year from 5.3 percent estimated for 2014, driven by construction, mainly in the important mining sector.
Namibia's inflation rate eased to 4.5 percent in January from a peak of 6.12 percent in June 2014 and 4.67 percent in December, and is expected to remain low during the rest of this year. In December the central bank estimated 2014 inflation of around 5.4 percent.