Namibia Dollar pegged one-to-one to the South African Rand

Namibians are by no means immune to the consequences of the actions of South African President Jacob Zuma as the Bank of Namibia explained this week.
Following Zuma’s juggling of Finance Ministers in the power-house economy of Southern Africa earlier this month; first firing Nhlanhla Musa Nene who had only served in the post since May 2014, replacing him with little-known David van Rooyen, former mayor of Merafong in central Gauteng, and then firing van Rooyen four days later to replace him with Pravin Gordhan who served in the capacity before Nene, the Rand has reeled under the onslaught.
On Monday it was more stable at about R15 per US Dollar after hitting a record R15,89 earlier the month.
Now Bank of Namibia acting director of strategic communications, Emma Haiyambo, has made sense of the whole affair for the average Namibian man on the street. As the Namibia Dollar is pegged one-to-one to the South African Rand, what happens there also has its effect here. “The depreciation of the Namibia Dollar against major trading currencies could result in higher prices of imported goods. This, in turn, could cause inflation to increase.

In other words, consumers would have to pay more for the same basket of goods, leaving them with less money to save and invest.
But just how much will Zuma’s antics cost you? Well, according to the Namibian central bank, during the period first fifteen days of this month, the Namibia Dollar depreciated by 4.8% against the US Dollar, 5.5% against the British Pound and 9.4% against the Euro. But even before that things were not all moonlight and roses.
Quarterly data showed that the Namibia Dollar depreciated by 20,7% against the US Dollar, 12,1% against the British Pound and 1,4% against the Euro during the third quarter of 2015, compared to the same period in 2014. During this period, exports only increased by 6,8%, while imports increased by 23,4%. This translated into the trade deficit widening to N$9.8 billion, compared to N$6.8 billion in the same quarter of the previous year, Haiyambo said.
“A sustained depreciation of the Namibia Dollar is usually expected to increase the prices of imports, while increasing the profits for exports. If the increase in the price of imported goods is higher than the receipts on export payments, then the trade deficit would worsen and vice versa.
It is, however, worth noting that the depreciation in the exchange rate is not the only factor that influences the widening in the trade deficit,” she said, adding that lower export earnings in relation to higher imports could partly be attributed to lower international commodity prices.

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