WINDHOEK, Nov. 18, 2025 — Namibia may not fully benefit from South Africa’s plan to lower its inflation target, according to the Bank of Namibia, which warned that domestic price pressures, especially wage demands and rising utility costs, could blunt any positive spillovers.
In a statement released on Tuesday, the central bank said the high share of administered prices in Namibia’s inflation basket remains a major obstacle to matching South Africa’s expected disinflation. Administered prices include government-regulated costs such as water, electricity, and municipal services, which tend to rise faster and more rigidly than market-driven prices.
“The relatively high proportion of administered prices in Namibia’s inflation basket may limit the country from fully reaping the benefits of the envisaged lower inflation target set by South Africa,” the Bank of Namibia said.
Why South Africa’s Inflation Target Matters for Namibia
Because the Namibian dollar is pegged to the South African rand, Namibia often experiences similar inflation trends. A lower inflation target in South Africa could ease imported price pressures, strengthen purchasing power, and support long-term interest-rate stability in Namibia.
But the central bank warned that local structural factors ; such as increases in electricity tariffs, water pricing, and wage settlements could undermine those benefits.
Plans to Rein in Domestic Price Pressures
To maintain price stability, the Bank of Namibia said it will work with key economic stakeholders to review how wages and administered prices drive inflation. The collaboration aims to slow inflationary momentum and ensure that Namibia can capture more of the gains from South Africa’s tighter inflation framework.
Economists say that if Namibia fails to contain regulated price increases, it may continue to experience higher inflation than its regional counterpart, potentially complicating monetary policy alignment, borrowing costs, and overall economic competitiveness.
