Economist Warns High Oil Prices Could Push Interest Rates Higher

Namibia’s interest rates could remain broadly stable in the coming months, although sustained increases in global oil prices and renewed inflationary pressures could prompt further rate hikes, according to Standard Bank Namibia Group Economist, Helena Mboti.

This comes as Bank of Namibia (BON) Governor, Ebson Uanguta announced on Wednesday that the Monetary Policy Committee (MPC) had increased the repo rate by 25 basis points to 7.00%, raising the prime lending rate to 10.50%.

Uanguta explained that the decision was taken “to safeguard the one-to-one link between the Namibia Dollar and the South African Rand and mitigate against second-round effects induced by high fuel prices.”

Speaking to Business Pulse 360° on Wednesday, Mboti said the decision to increase the repo rate was broadly in line with expectations, as the Bank of Namibia seeks to balance economic growth, inflation control, international reserves and the currency peg with the South African rand.

Mboti highlighted the impact of rising global oil prices on Namibia’s inflation outlook, noting that oil prices had moved above US$100 per barrel, recently reaching US$116 per barrel.

She warned that higher oil prices could increase fuel and transport costs and place further pressure on prices across the economy.

“Importantly for Namibia, oil prices have moved back above the $100 per barrel mark,” Mboti noted, pointing to the risks that rising energy costs pose to broader inflation.

Namibia’s annual inflation rate rose to 5.4% in September, one percentage point higher than in June 2026, according to reports.

The Bank of Namibia expects inflation to average 4.2% in 2026 before easing to 4.0% in 2027, although sustained increases in oil prices could put pressure on this outlook.

Furthermore, Mboti said the domestic economy continued to expand, but growth remained modest, with different sectors recording mixed performance , saying that mining activity and investment projects were supporting economic growth, while higher interest rates and rising costs were weighing on household and business spending.

In its latest monetary policy announcement, the BON projected economic growth of 2.1% in 2026 and 2.8% in 2027, up from 1.7% in 2025, although it also identified foot-and-mouth disease as a downside risk to the growth outlook.

Meanwhile, private-sector credit extension improved to 5.4% in August from 4.5% in June, indicating continued demand for credit despite tighter financial conditions.

Mboti noted that credit growth remained slower than the level needed to support stronger economic activity.

Furthermore, Uanguta highlighted the need to narrow the interest rate gap between Namibia and South Africa to limit potential capital outflows and safeguard international reserves.

He explained that the rate increase would help ‘'reduce the interest rate gap between Namibia and the anchor country to stem potential capital outflows and safeguard the stock of international reserves, Uanguta said.

The interest rate adjustment also narrows the difference between Namibia’s repo rate and South Africa’s policy rate, supporting the currency arrangement and helping limit the risk of capital outflows, Mboti said.

Mboti said the Monetary Policy Committee would continue to base its decisions on incoming economic data.

However, Mboti expects interest rates to remain broadly stable over the coming months, although risks remain tilted towards further increases.

“A prolonged period of elevated oil prices, stronger global inflation, or any additional tightening by major central banks could necessitate further policy action by the Bank of Namibia,” she warned.