Kampala- The Bank of Uganda has maintained its lending rate (Central Bank Rate) to commercial banks at 11.5 per cent as it was last month.
The Central Bank cited the likelihood of slightly high inflation levels in the medium term as the reason for maintaining the rate.
The current macroeconomic outlook by the Bank of Uganda forecasts suggests inflation will go down further in the coming months, driven by improved food crop harvests, but rise to 6.5 -7.5 per cent during the latter part of the year.
Addressing a news conference on Friday to announce the Central Bank’s policy rate for January 2014, the Bank of Uganda Governor, Mr Emmanuel Tumusiime Mutebile, said: “The potential rise in inflation and its timing will depend largely on movements in the exchange rate, changes in commodity prices, and the degree to which exchange rate, changes in commodity prices spill over in broader cost and price pressures.”
Mr Mutebile said in spite of the better than expected October 2013-December 2013 inflation outcome, the BoU continues to assess the risks to inflation outlook to be on the upside.
Mr Mutebeile said economic growth rate in the first quarter of 2013/14 was lower than expected as quarterly GDP declined by 0.6 per cent, compared to the previous quarter.
Hope for better
Mr Mutebile expressed optimisms that the economy is projected to pick-up in the remaining part of 2013/14, driven by the recovery in the agricultural production and public investment in infrastructure, which could enhance competiveness in the short to medium terms.
The executive director of research at Bank of Uganda, Dr Adam Mugume, said Uganda’s high economic growth rate was being supported by earnings from commodity exports from the neighbouring countries but due to ongoing political conflicts in DR Congo and South Sudan, Uganda’s exports to these countries have been affected.