(Bloomberg) -- Namibia’s central bank raised borrowing costs by the biggest margin in almost two decades to safeguard its currency peg with South Africa’s rand and quell inflation. 

The monetary policy committee lifted the rate by 75 basis points to 5.5%, Deputy Governor Ebson Uanguta told reporters in the capital, Windhoek, on Wednesday. That’s the biggest increase since September 2002.

The hike brings Namibia on par with South Africa, which raised its benchmark interest rate by 75 basis points last month, and aligns with other central banks seeking to blunt inflation and halt capital outflows.

The arid southwest African nation’s peg with the rand means its rate decisions mostly follow the South African Reserve Bank’s, but they have on occasion deviated when their inflation outlooks differ, such as in December 2007 through June 2008.  

Annual inflation accelerated to a more than five-year high of 6.8% in July, driven by surging food and transport costs due to the Namibian dollar’s depreciation against the greenback, surging energy prices and supply shortages caused by Russia’s invasion of Ukraine, the lingering effects of Covid-19 lockdowns and extreme weather. The central bank sees inflation averaging 5.8% this year, down from its previous forecast of 5.9%. 

International reserves stood at 49.2 Namibian dollars ($2.9 billion) at the end of July, compared with 43.9 billion Namibian dollars at the end of May. That’s enough to cover 6.1 months of imports and sufficient to help maintain the currency peg, Uanguta said.

The Bank of Namibia kept its its economic growth forecast for 2022 at 3.2%, as projected in its August Economic Outlook.

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