The inclusion of the Chinese currency, Yuan, to the Bank of Namibia’s (BoN) mix of international reserves is offering the bank a competitive risk-adjusted return linked to the currency’s higher yields and low correlation to other currencies,
the bank’s Deputy Director of Corporate Communications, Kazembire Zemburuka, has said.
The bank said it considered Namibia’s trade patterns as well as the composition of foreign-denominated obligations when it decided to include the Yuan on its basket.
“Therefore, the addition better aligns the structure of foreign reserves to Namibia’s foreign obligations and trade composition,” Zemburuka said.
The Yuan was included as part of BoN’s foreign reserves in November 2016.
The inclusion of the Yuan followed the decision by the IMF’s Executive Board to include the Yuan in the Special Drawing Rights (SRD) basket of currencies which was introduced 1 October 2016.
“The bank began contemplating adding the yuan as part of the approved foreign reserve currencies as early as 2013. Since that time, the bank has spent a significant amount of time readying itself to purchase yuan-denominated financial assets. The bank also had to wait for the level of foreign reserves to recover following a protracted period of outflows,” Zemburuka added.
As at 31 December 2017, the Yuan made up only one percent of the total foreign reserves.
“This may, however, change in line with the level of foreign reserves, changes to trade patterns and foreign-denominated obligations.”
Bank Windhoek announced two weeks ago that it will be selling and buying the Yuan.
Windsor Markus, Head of Treasury Sales at Bank Windhoek said Yuan notes will be traded in addition to the current range of foreign currency notes which are exchanged at 0% commission, with the bank accepting denominations of 10, 20, 50 and 100 Yuan at its branches.
Standard Bank Namibia opened its Yuan cash exchange solution at its Windhoek branch on 21 January 2016.
FNB Namibia has also established a desk to deal with Chinese clients.
Namibia imported goods worth N$2,8 billion in 2016 from China, according to the Namibia Statistics Agency statistics while it exported goods to China worth N$2, 4 billion during the same period.