Namibia benefits from Kwanza currency conversion agreement

November 6, 2015

The Bank of Namibia has dismissed speculations that the currency conversion agreement between Namibia and Angola has brought about a liquidity crisis in the country.

Bank of Namibia’s spokesperson, Ndangi Katoma, says contrary to such allegations the bank "has not observed any liquidity crisis in the Namibian banking sector.”

Data shows that during the first nine months of 2015, the overall liquidity position of the banking industry averaged N$3 billion, in comparison to N$3.2 billion over the same periods in 2014 and N$2.8 billion 2013. "The liquidity levels of the banks have, therefore, been within the normal ranges,” says Katoma.

On allegations that Namibian Dollars obtained through currency conversion are spent in Angola and not in Namibia, Katoma says figures as of October 27 indicate a significant increase of N$334 million in the total amount of money in circulation, compared to the period before the currency conversion agreement.

"The data shows that there was no significant additional demand for currency in circulation,” Katoma says. Further, the reserve bank says the Angolan National Bank has been able to keep up with its payment schedule, with N$282 million paid to Namibia in US Dollars bringing into the country "much-needed foreign reserves.” This, Katoma says, is contrary to the concerns and speculation that the Angolan National Bank would not have sufficient hard currency in US dollars to exchange for the N$2.8 billion worth of Kwanza in Namibia. Nevertheless, Katoma admits that the amount of money exchanged at the start of the agreement was beyond the expectations of both the central bank of Angola and the Bank of Namibia: "As a result the repayment schedule had to be revised to avoid putting unnecessary pressure on the foreign reserves of Angola at once.”

The Bank of Namibia, nevertheless, says it is working with the Angolan authorities to address whatever challenges arise from the agreement. "The bank will continue to work closely with the central bank of Angola to address challenges as they rise. Once the discussions are duly concluded, the public will be informed about the outcome of the discussions. "It should be emphasised, however, that this agreement is benefiting Namibia in various ways. Community members of the two border towns (Oshikango and Santa Clara) are now able to exchange respective currencies for payment of goods and services from businesses at the border towns.

"As a country, Namibia is benefiting from this agreement because the Bank of Namibia is paid in US Dollars for the equivalent of Kwanzas deposited by our commercial banks, which contribute positively to our much-needed foreign reserves,” Katoma explained.

Source: New Era