Namibia’s financial system maintains its stability despite global and domestic risks

The Bank of Namibia’s (BoN) Macroprudential Oversight Committee (MOC) has announced that the country’s financial system remains stable, robust, and resilient.

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Newstimehub

13 Dec, 2024

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The Bank of Namibia’s (BoN) Macroprudential Oversight Committee (MOC) has announced that the country’s financial system remains stable, resilient, and robust.

In a published report, it was stated that both the banking and non-banking financial sectors possess sufficient capital and liquidity buffers to absorb losses. Additionally, it was highlighted that the payment infrastructure and operations are functioning effectively.

Performance of the Banking and Non-Banking Sectors

The MOC emphasized that progress has been made in strengthening the resilience of the banking sector and addressing vulnerabilities in the real estate market through macroprudential policies. The report noted that global economic growth is expected to remain steady at 3.2% in 2024 and 2025, supported by increased investment, low inflation, and stable trade flows.

However, risks persist, including geopolitical uncertainties, high public debt levels, and vulnerabilities in the real estate market. For Namibia specifically, real GDP growth is forecasted to decline to 3.5% in 2024, with a rebound to 4.0% in 2025. Nevertheless, drought conditions and low diamond prices pose downward risks to this growth.

Developments in the Banking Sector

The banking sector showed resilience in the third quarter, with assets increasing by 3.7%, reaching 181 billion Namibian dollars. While liquidity ratios improved, profitability declined due to a reduction in net interest income and higher provisions. The non-performing loan (NPL) ratio rose to 5.9%, but this level remains manageable, with adequate provisions and capital buffers in place.

Non-Banking Financial Institutions and the Real Estate Market

The assets of non-banking financial institutions grew by 9.0%, reaching 486.6 billion Namibian dollars, thanks to improvements in global financial markets and rising demand for financial products. In the real estate market, moderate vulnerabilities such as weak credit demand and sluggish housing sales were identified. However, monetary and fiscal policy measures are expected to aid the sector’s recovery.

Conclusion and Future Plans

Namibia’s interbank and settlement system performed well, reducing settlement risks. The MOC noted that regulatory measures, such as changes to the Credit-to-Value Ratio, have been taken to strengthen the resilience of the banking sector and address vulnerabilities in the real estate market.

The Committee stated that, at present, no additional macroprudential policy interventions are necessary but emphasized that it will continue to monitor risks and conditions to ensure the stability and resilience of the financial system.