Namibia may delink currency from volatile South African rand

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The government in Windhoek is weighing options to amend the currency arrangement or forge a new path for the Namibian dollar, according to Namibian finance minister Calle Schlettwein. The government in Windhoek is weighing options to amend the currency arrangement or forge a new path for the Namibian dollar, according to Namibian finance minister Calle Schlettwein.

The government in Windhoek is weighing options to amend the currency arrangement or forge a new path for the Namibian dollar, according to Namibian finance minister Calle Schlettwein.

Namibia is growing tired of the economic pain caused by the volatile rand and is considering ending a 25-year-old peg to the currency of its larger neighbour.

The government in Windhoek is weighing options to amend the currency arrangement or forge a new path for the Namibian dollar, Namibian finance minister Calle Schlettwein said in an interview in New York.

A change isn’t imminent as the nation seeks to emerge from its first recession in 14 years, but as the economy recovers, integration with SA, including customs agreements, has to be re-assessed. “The whole basket has to be re-evaluated,” he said.

Namibia, a country bigger than France by land area but with a population of just 2.6-million people, introduced its own currency in 1993, pegged at parity to the rand, three years after gaining independence from SA. Regional neighbours Lesotho and Eswatini, formerly known as Swaziland, have a similar arrangement. The three nations, together with Botswana, also operate a customs-sharing pool with SA.

The rand is the fifth-worst performing emerging-market currency against the dollar this year, weakening more than 14%  as it is buffeted by trade tensions between the US and China, SA’s biggest trading partner. The currency posted a low of R15.6958 and a high of R11.5078 against the dollar in 2018.

More volatility appears in store for 2019, with a South African election in May adding to local risks. The cost of hedging in the options market against price swings in the currency over the next year has climbed almost 500 basis points since April, well above the five-year average.

The rand was at R14.4342 to the dollar on Friday afternoon, with Bloomberg-compiled forecasts for its end-2019 level ranging from R12.60 to R16.50.

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Namibia Property Market  |  South African Rand  |  Calle Schlettwein

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