Windhoek – Namibia’s financial system has been given a clean bill of health despite challenges brought on by the global COVID-19 pandemic.
The thumbs up came from both the Bank of Namibia (BoN) and the Namibia Financial Supervisory Authority (NAMFISA) this week.
The institutions said despite an eight percent GDP decline in 2020, symptomatic of the global economic downturn, Namibia’s banking and non-banking financial sector was soundly capitalised and stable.
“The financial system continued to function efficiently and effectively, while remaining generally sound and profitable the banking sector remained adequately capitalised, profitable and maintained liquidity levels well above the prudential requirements,” the financial stability report by BoN and NAMFISA said.
However, asset quality as measured by non-performing loans deteriorated in 2020, a development partly ascribed to unfavourable economic conditions and their impact on household disposable income and business performance.
“Household debt growth slowed, and corporate debt declined significantly in 2020 with risks to financial stability having gone down,” noted the report.
It said the financial system’s resilience was maintained into early 2021, with the start of the rollout of vaccines in many parts of the world raising prospects of gradual normalisation of socio-economic activities over the coming months.
Authorities remain cognisant of the probability of downside risks to financial stability emanating from liquidity constraints in the banking sector.
“The potential impact on financial stability originating from both liquidity constraints and asset quality deterioration in the banking sector was assessed to be medium. To mitigate the impact of the deterioration in asset quality, the Bank of Namibia implemented additional regulatory reporting and will continue to monitor heightened credit risk going forward,” said the report.