Windhoek – Hit hard by the effects of the ongoing global economic uncertainty occasioned by the new coronavirus pandemic, economies in Southern Africa are going for broke to save jobs and salvage disposable incomes.
Namibia’s Finance Minister, Ipumbu Shiimi, recently told that country’s parliament that the government would have to do the unusual” to weather the storm.
Among the options being pursued are deep interest rate cuts to cushion economies from sinking further, and rolling out big subsidy programmes to improve industrial productivity in the face of declining mining, tourism and retail revenues.
Botswana, Namibia, South Africa and Zimbabwe have all gone for steep interest rate cuts to breathe life into businesses that urgently need access to cheap money. They rationale behind this is also to give households space to borrow sustainably
Namibia’s central bank last week followed South Africa in slashing interest rates by 25 basis points to take them to their lowest ever level since independence in 1990.
“This is a record interest rate cut since 30 years ago and this will remain one of the instruments we will pursue to improve the economic performance, save jobs as well as promote productive borrowing among individuals and corporates,” Bank of Namibia (BoN) Deputy Governor Ebson Uanguta said in a monetary policy statement.
BoN acknowledged that the current economic challenges had inflicted major damage to the major of manufacturing, retail, tourism and wholesale.
Namibia’s tourism, manufacturing and wholesale sectors have in recent months shed close to 2,000 jobs; and the retail sector has announced realignment plans that will see 1,000 people losing their jobs.
Finance Minister Ipumbu Shiimi said doing the unusual was the best foot forward.
“Namibia will continue to spend on the high side for this financial year to mitigate the effects of the coronavirus on the economy but will cut down in the next year when the challenges recede,” he told Parliament.
Defending the ballooning expenditure, a growing deficit and a cumbersome public debt, said unusual times called for unusual measures.
Namibia’s has racked up its highest national budget deficit, above 12 percent, and incurred a debt to GDP ratio above the SADC standard of 40 percent.
Earlier, South Africa Reserve Bank Governor Lesetja Kananga slashed the repo rate to 3,75 basis points - the lowest in decades.
He said this was meant to support the fiscal policy announced by Finance Minister Tito Mboweni, who has been strong on stimulus packages to spur growth, protect jobs and ease the erosion of incomes.
Last week, Zimbabwe’s Finance Minister Mthuli Ncube and Reserve Bank Governor Dr John Mangudya introduced a new foreign currency auction system that the government hopes will breathe liquidity into the market.
The government also introduced a new US$75 non-taxable allowance for every public employee to cushion disposable incomes, which in turn could boost the retail sector.
That is not all. The central bank is pushing to keep traditionally high interest rates below 20 percent in a bid to ease conditions of borrowing for productive sectors.