KAMPALA – The Bank of Uganda [BoU] has maintained the Central Bank Rate [CBR] at 6.5 percent for the month of April 2022, as the economy continues to recover from the Covid-19 related downturn.
According to BoU Deputy Governor, Michael Antingi- Ego, BoU decided to keep the CBR at 6.5 percent because the recent rise in price has not spread across the basket of consumer goods and services.
Commercial bankers in Uganda are supposed to match their lending rates with the CBR, but this has not been the case, as the average prime lending rate stands at about 18 percent, which is more than two times the current CBR of 6.5 percent.
Most borrowers now run to Savings and Credit Cooperative Societies (SACCOs) for cheaper credit that comes with lower interest rates.
Local banks base high interest rates on both internal and external risks and so the CBR formulated by BoU almost remains irrelevant to them. Stanbic Bank Uganda, the largest by assets offers the lowest rate of 16.5 per annum.
Antingi-Ego said BoU will closely track inflationary developments and take appropriate pre-emptive action, where necessary, to ensure inflationary expectations remain contained around the medium-term target going forward.
“The BoU will maintain the credit relief measures for the education and hospitality sectors which remained under lockdown for an extended period. Furthermore, BoU will maintain the Covid-19 Liquidity Assistance Program [CLAP] to manage potential liquidity risks arising from the pandemic until the economic situation normalizes,” he said in Kampala, while releasing the Monetary Policy Statement for April.
He said inflation has remained below the medium-term (2 – 3 years ahead) target of 5 percent for five years to March 2022. “Inflation remains below the target partly because the spike in prices of some commodities such as those of vegetable oil products carry a relatively smaller share of household budgets. Also, the strong shilling exchange rate helped to dampen price pressures.”
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