Imelda Ambondo
The Bank of Namibia has welcomed South Africa’s decision to lower its inflation target from 3-6% to 3% with a 1% tolerance band, announced on 12 November 2025, as a positive development for Namibia’s economy.
As a member of the Common Monetary Area (CMA), Namibia is set to benefit from the move, which is expected to lead to lower inflation and reduced interest rates in South Africa, and subsequently, in Namibia.
According to the Bank’s analysis, the lower inflation target will result in stable long-term inflation in Namibia, supporting price stability and economic growth. “The new target will help entrench disinflationary discipline across the economy, reduce long-term borrowing costs, and strengthen investor confidence,” said Bank Governor Johannes !Gawaxab.
The CMA agreement requires Namibia to align its monetary policies with South Africa’s, ensuring every Namibian dollar is backed by international reserves. Despite this constraint, the Bank of Namibia believes membership benefits, including price stability, elimination of transaction costs, and access to deeper financial markets, outweigh the costs.
However, the Bank notes that Namibia’s high administered prices may limit the benefits. To address this, they will engage with stakeholders to consider wage and price implications, promoting price and monetary stability.
The move is expected to support household purchasing power, ease financing conditions for firms, and drive economic growth. “A firmly anchored inflation environment narrows the gap between nominal and real interest rates, creating space for sustainable lower inflation outcomes,” said !Gawaxab.
The Bank of Namibia is optimistic about the new target’s positive impact on the country’s economy and will continue to work towards maintaining macroeconomic stability.
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