Answer to Question #233020 in Economics for teopolina

Question

The Namibian economy is closely linked to South Africa with the Namibian dollar pegged to the South African rand. Discuss the monetary arrangement & the peg and how it works.

Please refer to the Common Monetary Area (CMA). Hint: Consult Bank of Namibia website

Answer 1

Namibia's economy is closely tied to South Africa, where the Namibian dollar is pegged to the South African rand. The privatization of several enterprises in the coming years could stimulate long-term foreign investment, although the trade union movement opposes this, and so far most politicians have been reluctant to push the issue forward. In September 1993, Namibia introduced its own currency, the Namibian dollar (N $), which is pegged to the South African rand at a fixed 1: 1 exchange rate. it has a little more flexibility in monetary policy, although interest rates have so far always been very close to those of South Africa. rates. Namibia imports almost all goods from South Africa. Many exported goods also go to the South African market or in transit through that country. Namibia's exports consist mainly of diamonds and other minerals, fish products, beef and meat products, karakul skins, and light products. In recent years, Namibia has accounted for about 5% of SACU's total exports and a slightly higher percentage of imports. Namibia is seeking to diversify its trade relations by removing its heavy reliance on South African goods and services. Europe has become the leading market for Namibian fish and meat, and Namibian miners have purchased heavy equipment and machinery from Germany, the United Kingdom, the United States, and Canada. The Namibian government is working to take advantage of the US-led Africa Growth and Opportunity Act (AGOA), which will provide preferential access to US markets for a long list of products. In the short term, Namibia is likely to see an increase in apparel production as a result of AGOA.