Central Bank Reduces Benchmark Lending Rate to 12%

2068 Views Kampala, Uganda

In short
Central Bank Governor Emmanuel Tumusiime-Mutebile said that core inflation is forecast to remain around the medium term target of five percent over the next 12 months.

The Bank of Uganda has reduced its benchmark lending rate to 12 percent from 13 percent owing to an optimistic economic outlook.

Central Bank Governor Emmanuel Tumusiime-Mutebile said that core inflation is forecast to remain around the medium term target of five percent over the next 12 months.

Mutebile said although their prediction is that in the short-term inflation will be slightly higher owing to hike in food prices; it will decline in 12 months' time.
 
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Mutebile added that in line with efforts to keep the domestic economic growth momentum, the BoU believes that there is scope to continue easing monetary policy. He said that accordingly, Bank of Uganda will reduce the Central bank Rate by one percentage point.
 
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Lowering of the CBR is expected to translate into reduced interest rates charged by banks on private sector borrowing.

The BoU has on three consecutive occasions reduced the CBR but the banks have not followed suit. The interest rates are still hovering around 23 percent, the highest in East Africa.

While addressing an economic forum in Kampala last week, the Chairman of Uganda Bankers' Association, Fabian Kasi, said Uganda's economy is still too small, open and exposed making it hard to have lower interest rates.

Kasi, also the Chief Executive of Centenary Bank, said the cost of money in Uganda is too high and that long-term savings like fixed deposits are not that much. He also said banks foot a lot of costs like rent, ICT, salaries, utilities and others that they have to recover.

Despite the bankers' claim of costs, banks in Uganda annually post abnormal profits - in billions of shillings. Centenary bank, for example, posted over 100 billion Shillings in 2015/16 financial year.

 

Mentioned: bank of uganda

About the author

David Rupiny
In his own words, David Rupiny says, "I am literally a self-trained journalist with over 12 years of experience. Add the formative, student days then I can trace my journalism roots to 1988 when as a fresher in Ordinary Level I used to report for The Giraffe News at St Aloysius College Nyapea in northern Uganda.


In addition to URN for which I have worked for five years now, I have had stints at Radio Paidha, Radio Pacis, Nile FM and KFM. I have also contributed stories for The Crusader, The New Vision and The Monitor. I have also been a contributor for international news organisations like the BBC and Institute for War and Peace Reporting. I am also a local stringer for Radio Netherlands Worldwide.


I am also a media entrepreneur. I founded The West Niler newspaper and now runs Rainbow Media Corporation (Rainbow Radio 88.2 FM in Nebbi). My areas of interest are conflict and peacebuilding, business, climate change, health and children and young people, among others."