During the first quarter of 2006, there was a mixed performance in the economic activities of Namibia. Positive performances were only observed in the mining, electricity and water, and transport sectors, while others such as agriculture, construction, wholesale and retail trade, and hotels and restaurants performed disappointingly.

In its quarterly report released this week, the Bank of Namibia (BoN) says the upward trend of inflation observed since the third quarter of 2005, continued during the first quarter of 2006. The increased inflationary pressure was attributed mainly to the rise in the rates of the categories food and non-alcoholic beverages and housing, water, electricity, gas and other fuel.

Central Government debt declined during the fourth fiscal quarter of 2005/06 in comparison to the previous fiscal quarter. The decline in the stock of total outstanding debt of Central Government was reflected in the decrease in the stock levels of both the domestic and foreign debt. This augurs well for and is supportive of the prudent fiscal policy stance pursued by the Government.

The surplus in the overall balance of the balance of payments for Namibia widened during the first quarter of 2006 from the level in the fourth quarter of 2005. This improved surplus of Namibia’s balance of payments is attributable to the increased current account surplus in the first quarter of 2006, while the capital and financial account balance once again turned into a deficit position from a surplus recorded during the fourth quarter of 2005. The improved current account surplus during the quarter is mainly ascribed to substantial increases in the compensation for the use of Rand currency as legal tender in Namibia and in transfers from the common customs pool of the South African Customs Union (SACU).

With regard to exchange rate developments, the external value of the Namibia Dollar appreciated, quarter-on-quarter, against other major currencies during the first quarter. This appreciation was also observed on the trade weighted exchange rate, as measured by the nominal and real effective exchange rate indices.