April 9, 2018—The Bank of Uganda (BoU) has left the rate generally used as the benchmark for commercial banks to set their own Prime Lending Rates (PLR) at 9pc. The present average PLR across the board is 20pc with Stanbic Uganda offering the lowest at 17.5pc.
Prof. Emmanuel Tumusiime-Mutebile, the BoU Governor said on Monday maintaining the Central Bank Rate (CBR) at 9% is still consistent with supporting economic growth and achieving the inflation target over the medium term. In February, the BoU reduced the CBR from 9.5pc to 9pc.
Mutebile told a news conference that, contrary to what most Ugandans believe, the economy is growing at the right pace and is expected to grow faster in the next three years. According to the latest Monetary Policy Statement, the composite index for economic activity (CIEA) which is used by BoU as a measurement for real economic activity growth projects a growth of about 6.4pc during February 2018.
While referring to the Uganda Bureau of Statistics (UBOS) quarterly Gross Domestic Product (GDP figures, Mutebile said economic growth at 6.3pc in 2017 compared favourably with the 3.0pc in 2016.
Other UBOS figures show that the inflation has remained subdued with the annual inflation rate at 2pc in March 2018, a slight reduction from 2.1pc registered in February 2018 while the core inflation remained unchanged.
The reduction in the annual inflation is attributed to decline in food crop inflation which dropped to -1.7pc from -0.7pc in February 2018, energy fuel utilities inflation although declined to 10.3% in march from 11.2pc in February 2018.
Mutebile said there has been growth in all major sectors. Agriculture grew by 6.1% in 2017 from a decline of -0.4pc in 2016, the service sector grew by 8.1pc from 4.5pc while industry registered a slight growth from 4.2 in 2017 to 4.4pc in 2018.
“Economic growth outlook is more positive than was forecast at the Monetary Policy committee (MPC) meeting of February 2018 and there are signs of increased business confidence. Economic growth is projected at an average of 6.5% in the next three years,” Mutebile said
This forecast gradual recovery of GDP growth is based on a favorable external scenario, strong private and public sector investment, improved agricultural productivity and the absence of significant macroeconomic imbalances. However despite the growth, fiscal absorption and private sector credit growth remain weak.