Uganda’s central bank-Bank of Uganda has left its key lending rate unchanged at 9.0 per cent, saying that risks to inflation were balanced and inflation was expected to rise gradually.
In February, BOU cut its benchmark lending rate by 50 basis points to 9.0 per cent, its lowest ever, saying lending for small businesses remained costly despite recent policy easing.
BOU governor Prof. Emmanuel Tumusiime-Mutebile while addressing the media in Kampala said that inflation was expected to rise to around 5 per cent by the end of 2019.
“The 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,” he said.
According to Uganda Bureau of Statistics, inflation plummeted to 2.0 per cent year-on-year in March from 2.1 per cent the previous month as some food prices declined.
The governor said gross domestic product was projected to grow at an average 6.5 per cent in the next three years. The output gap was estimated at about minus 2.0 per cent in fiscal year 2016/17 (July-June), but the gap was expected to close in 2018/19.
He said the forecast gradual recovery of GDP is premised on favourable external scenario, strong private and public investments, improved agricultural productivity, and the absence of significant macroeconomic imbalances.
Mutebile said that there was growth in all major sectors of the economy: the agricultural sector grew by 6.1 per cent in 2017 from -0.4 per cent in 2016, the service sector grew by 8.1 per cent from 4.5 percent while the industry registered a slight growth from 4.2 in 2017 to 4.4 per cent in 2018.
There are nonetheless downside risks to this outlook, as indicators of aggregate demand including fiscal absorption and private sector credit growth remain weak,” he said.