Namibia's central bank maintained its benchmark repo rate at 6.25 percent while assessing the impact of the February rate cut, but remains concerned over the high growth in installment credit that is being used by households to finance the import of unproductive luxury goods and thus putting additional pressure on the country's international reserves.
The Bank of Namibia, which raised its rate by 25 basis points on Feb. 18 following rate rises totaling 50 points in 2014, welcomed a recent decline in the growth of household overdraft loans.
However, it noted that installment credit to households was up by 18.7 percent on average over the last six months to February, only slightly down from an 18.9 percent rise in the second half of 2014.
Namibia's stock of foreign reserves declined to 15.7 billion Namibian dollars as of April 10 from N$16.0 billion at the end of January, but the central bank said this remained "adequate" to maintain the currency's one-to-one link to the South African rand.
"The MPC, however, remains concerned that the growing import bill is unsustainable; particularly the increase importation of unproductive goods, such as luxury vehicles," the bank said.
Namibia's current account deficit widened to N$9.6 billion in 2014 from 5.0 billion the previous year, rising to 6.7 percent of Gross Domestic Product from 4.0 percent in 2014, due to high imports.
Economic growth looks to have improved during the first two months of the year, driven by robust public and private construction, strong sales in wholesale and retail trade, and growth in diamond mining and manufacturing.
The central bank confirmed its forecast for 2015 growth of 5.6 percent, up from 2014's 5.3 percent.
Namibia's inflation rate continued to decline to 3.4 percent in March from 3.6 percent in February, mainly due to lower increases in transport prices along with housing, water, electricity and other fuel.
"Overall annual inflation is, however, expected to remain stable," the central bank said.