Bank of Uganda maintains lending rate at 12%
Posted Tuesday, November 5 2013 at 02:00
Kampala- Bank of Uganda yesterday maintained the Central Bank Rate (CBR) at 12 per cent, saying the current rate is neutral enough to support the country’s high economic growth as well as low commercial lending rates.
Addressing a news conference yesterday, the Governor Bank of Uganda, Mr Emmanuel Tumusiime Mutebile, said economic data on the first quarter data indicates a buoyant level of economic activity which, if maintained, would be consistent with growth rate of six per cent or above for the 2013/14 Fiscal Year.
“Commercial banks’ shilling denominated credit to the private has increased for the fourth successive month indicating that bank lending is gaining momentum. Average bank lending rates for shilling denominated loans declined to 22.5 per cent in September 2013 from 23.1 per cent in the previous month, a reduction which should support further growth in bank lending,” he said.
Following a high double digit inflation rate, the central bank was forced to raise the CBR, which had a negative impact on Uganda’s economic growth rate in the financial year 2011/12, with growth rate drastically dropping to 3.4 per cent.
Explaining the current situation in the economy, Mr Mutebile said real growth is close to the economy’s long term potential of six to seven per cent growth.
Despite the rise in Uganda’s economic growth, there are still risks facing the economy such as the elevated inflation rate which is still above the target of maintaining it at five per cent per annum.
“The buoyancy of domestic demand may constrain the rate at which core inflation will fall back in the medium term. Our forecast for annual core inflation is that it will be in the range of 6.5 per cent to 7.5 per cent in 12 months’ time and that will fall back towards 5 per cent in 2015,” Mr Mutebile said.
The executive director research Bank of Uganda, Dr Adam Mugume, said Uganda’s economy grew by 2.1 per cent in the first quarter of financial year 2013/14.
“This is a very good growth rate,” he said.