18 February 2018

Uganda: BOU Moves to Trigger Reduction in Lending Rates

On Feb.13, Bank of Uganda announced a cut in the Central Bank Rate by 0.5 percentage points to 9% in the next three months as a measure for boosting private sector credit uptake and economic activities.

The Governor, Emmanuel Tumusiime Mutebile, said the decline in headline inflation and core inflation from 3.3% and 3% last December to 3% and 2.6% in January 2018 respectively triggered the lowering of the policy rate.

The CBR is used as part of monetary policy instruments to give direction to commercial bank lending rates for a particular period of time.

"Given the objective of keeping inflation close to the target and the estimated spare capacity in the economy, a cautious easing of monetary policy is warranted to further boost private sector credit growth and to strengthen the economic growth momentum," Mutebile said.

The 9% rate is the lowest since 2011 when Inflation Targeting Lite (ITL) was introduced to tame inflation that had jumped to 30%, the highest since 1993. The highest point, the CBR has been was 23% at the end of 2011.

Meanwhile, Mutebile said there are indications of a revival in private investment activity reflected in the recovery of foreign direct investment, which grew by 18.5 % in 2017 compared to a decline of 30.5% in 2016; improvement in shilling credit extension recorded at 10.8% in December 2017 compared to 7.9% in December 2016; and increased imports of raw materials and capital goods, which grew by 17.4% compared to a decline of 21.1% in the period under review.

He said economic growth for FY2017/18 is projected to be in the range of 5.0-5.5%, signalling a positive payoff for the current stimulatory monetary policy. Many banks have recently announced reductions in interest rates with the average lending rate now quoted as 20%.


Uganda, Other EA Countries Supplying Banned Plastic Bags to Kenya

On June 22, 2018, the Environment and Lands Court ruled in favour of the plastic bag ban. Read more »

See What Everyone is Watching

Copyright © 2018 The Independent. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 600 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.