Should Namibia Institute QE to Help Stimulate the Economy?

In 2010, the Bank of Namibia raised the interest rate I believe 5 times, I think 3 times since I arrived in Namibia in September. The current repo rate is at 5.5% and the benchmark interest rate is at 6% (last time I checked in February 2011), which is in line with South Africa.

But has that changed anything? The current benchmark interest rate in Namibia is really at near 0% in terms of the interest exchange rate. Since none of the Bank of Namibia monetary policies seem to work to help stimulate Namibia’s economy to create more sustainable employment, should the Bank of Namibia institute a QE1 (Quantitative Easing) policy?

The only problem with that might be that Namibia’s inflation is already at near all time high at about 5.2% (yes the unemployment rate is going up and so as inflation, hence a stagflation since almost 21 years ago), and any more cash increase in the economy could trigger a more viral consumer price hike.

Also, the problem with a QE for Namibia could be that the banks in Namibia may not hold considerable large amount of assets (short or long-term) that the government can buy from these banks in order to help increase cash reserve for the banks to lend out cash to the  borrowers. What’s the current RRR (required reserve ratio) for the Namibian banks?

Also, the Namibian Government may not have enough cash to buy up some of the banks’ short-term (or even long-term) assets with a considerable amount of money that can help make an even the smallest up-tick in the economy. Yes, the Namibian economy expanded by about 4.2% in 2010 compare to the 2009’s contraction of 0.7%. But given that Namibia is the world’s largest offshore diamond miner and the world’s fourth largest uranium producer, more than just 4.2% could be better. How about instead that the Namibian economy could experience may be about 15% nominal and 9% real growth instead of 4.2%? And is 4.2% real or nominal GDP?

Also, since more than half of the Namibian population is unemployed, currently at more than 54%, which may not include those who have stopped looking for work, even if the government pumps cash in the banks to increase the banks’ lending liquidity, there may not be too many people borrowing money from the banks in order to spend it in the economy.

Yes, car sales in Namibia has gone up exponentially in the last year or so, but the housing market sales may be down due to last year’s banks’ policy to only give mortgage loans to those who make N$12,000 or more per month.

So, is QE a good thing for Namibia? Can it help ease the unemployment rate in Namibia and help boost economic growth while keeping inflation under control?

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One thought on “Should Namibia Institute QE to Help Stimulate the Economy?

  1. Pingback: Namibia banks | U2belong

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