East Africa state Governor of Bank of Uganda (BoU) earlier today stated that the Central Bank Rate (CBR) has slightly decreased to 10%. The initial CBR was at 10.5% but has been cut by 0.5% as mentioned by Emmanuel Tumusiime Mutebile.
The CBR sends a signal to the market on the direction of interest rates. This rate, which was introduced in 2011, also aims at managing inflation that has remained below 10% for most parts of last four years, lower than about 30% recorded in parts of FY2011/12.
The bank has this year been lowering the rate to ease cost of credit and boost economic growth. The CBR was 12% from Dec, 2016 up to February 2017 before it was lowered to 11.5% in February and then to 11.5% in April 2017. Analysts say Uganda’s commercial bank interest rates currently averaging at 22% are still high to boost economic growth that is expected to shrink to 3.9% by the end of this financial year, lower than 5.5% projected growth.
Mutebile told reporters at BoU headquarters in Kampala that his announcement is expected to boost private sector credit growth which marginally went up from 7.2% in November 2016 to 7.5% in February 2017.
Mutebile’s policy action is ideally expected to support government’s plan of revamping the economy by partly reducing interest rates in addition to providing long term capital to the private sector as stated in the Shs 29 trillion budget for FY2017/18, whose implementation starts next month.