Eyes on lenders as Uganda CBR drops to 13 percent
Kampala October 18 – Uganda’s key policy rate dropped a point further, settling at 13pc as the Bank of Uganda made its fourth rate move of the year.
The central banker cited the continued downward trend of inflation and the need to boost a sluggish economy as part of the reasons for the 100 basis points reduction.
Releasing the Monetary policy Statement for October, Emmanuel Tumusiime Mutebile the Governor at Bank of Uganda said Annual headline and core inflation had respectively dropped to 4.8 percent and 4.2 percent in September 2016, down from 5 and 4.8pc in August, a trend that is forecast to hold into 2017.
It remains to be seen how the banking industry that has been slow to match the BoU’s rate cuts will respond to the latest moves that comes amidst a soaring NPL portfolio and public agitation for lending rate caps.
“A gradual recovery in private sector credit to support private sector spending and economic growth is crucial now. With the rise in nonperforming loans to 8percent, which tends to reduce the likelihood of banks to lend to the private sector, easing the monetary policy will change this,” Mutebile said.
BoU Executive Director for Research Dr. Adam Mugume is however positive that the central banker’s continued intervention will eventually yield results because as the private sector gets access to credit, the NPL levels will also go down and the economy will grow in the long run.