The Bank of Uganda (BoU) has lowered its lending rate also known as the CBR by 0.5 percentage points to 11.5 percent in February 2017. The CBR which is read bi-monthly to the press has been reduced from 12 percent in December 2017. The Central Bank Rate (CBR) is a policy rate used by the central bank to determine lending to Financial Institutions.
According Governor Emmanuel Tumusiime-Mutebile, Bank of Uganda judges that a further cautious easing of monetary policy is warranted to support economic activity in Uganda. Mutebile further says that the easing would be consistent with achieving the country’s annual core inflation target of 5 percent over the medium term.
According to Mutebile’s statement, The Bank of Uganda’s (BoU) Composite Index of Economic activity for December 2016, indicates a slowdown in economic activity in the quarter to December 2016. This was attributed to domestic and external factors especially the long drought.
Mutebile also states that Economic growth estimates for the first half of Financial Year 2016/17 indicated that Gross Domestic Product (GDP) growth was weaker than expected, largely reflecting temporary adverse weather related factors.
Economic prospects look more optimistic for Financial Year 2017/18, with Gross Domestic Product growth expected to grow at 5.5 percent, driven by improved public infrastructure investment, a recovery in private sector investment and improvements in agricultural production and consumption.
We wait to see whether the BoU’s lowering of the Central Bank Rate (CBR) will be reciprocated by Commercial Banks lowering there maximum lending rate to individuals and businesses. Currently the Commercial Banks with the lowest lending rate in Uganda are Bank of India and Eco Bank with 25 percent and 26 percent respectively.
Bank of Uganda Monetary Policy statement for February