BoU Governor Emmanuel Tumusiime-Mutebile.

Despite the Bank of Uganda BoU) keeping the central bank rate (CBR) unchanged at 10 percent in August 2019, the shilling denominated lending increased from 19.02 percent in June to 21.4 percent in July 2019, according the Performance of the Economy Report for August.

According to the report released by the Ministry of Finance Planning and Economic Planning (MFPED), the increase in commercial bank lending rates in July is in-part due to the high operational costs borne by the commercial lenders coupled with their risk averse tendencies.

“Likewise, foreign currency lending rates slightly increased from 6.43 percent in June to 6.92 percent in July 2019,” the report says.

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The stock of private sector credit increased by 0.9 percent from Shs 15,092.2 billion in June to Shs15,226.26 billion in July 2019. The continuous growth in the stock of credit is partly attributed to the sustained improvement in economic activity and the supportive monetary policy stance maintained by BoU.

Similar to June 2019, the Trade sector received the largest share of credit approved in July 2019 at 24.1 percent. Other notable sector recipients of new credit during the month were personal loans and household loans (16.5 percent), Building Construction and Real Estate (15.9 percent) followed by Manufacturing sector at 10.3 percent.

Uganda’s merchant trade deficit

According to the report, Uganda’s merchandise trade deficit narrowed on a monthly basis whereas it increased on an annual basis. In comparison with the previous month, the merchandise trade deficit narrowed by 17 percent from US$278.91 million to US$ 231.42 million in July 2019, following a decline in imports and an increase in exports.

“Compared to July 2018, the merchandise trade deficit increased from US$166.56 million to US$ 231.42 million in July 2019. This was explained by higher growth in imports that more than offset growth in exports,” the report says.

Uganda’s exports in July

Uganda’s export earnings increased both on an annual and monthly basis. Export earnings grew by 5.9 percent from US$ 300.63 million in June 2019 to US$ 318.43 million in July 2019. The growth was attributed to increased earnings from different export commodities such as coffee, cocoa beans, rice, base metals, fruits and vegetables.

Earnings from coffee increased following increases in both its volume and the international price. Compared to July 2018, coffee export receipts increased by 11.9 percent from US$ 284.65 million to US$ 318.43 million in July 2019.

Destination of Uganda’s exports

In the month of July 2019, the Middle East was Uganda’s top destination for merchandise exports, followed by the East African Community (EAC), then the Rest of Africa. 32.4% of Uganda’s merchandise exports were absorbed by the Middle East in July 2019. Exports to the Middle East increased from US$ 38.08 million in July 2018 to US$ 103.17 million in July 2019. “Compared to July 2018, Uganda`s exports to all regions grew with an exception of the EAC. Exports to all EAC Partner States dropped save for Burundi,” the report says.

Uganda’s imports in July

During the month of July 2019, the value of merchandise imports declined on a monthly basis but increased on a yearly basis. The value of merchandise imports dropped by 5.1% from US$ 579.54 million in June 2019 to US$ 549.85 million in July 2019. The decline was attributed to a decrease in government imports. “Government imports declined by 70.2% whereas private sector imports increased by 5.8%,” says the report.

In comparison with the same month the previous year, the import bill increased by 21.9 percent from US$ 451.21 million to US$ 549.85 million in July 2019. Both Government and private sector imports registered increases.

The report says Asia remained the main source of imports to Uganda in the month of July 2019, followed by the EAC, and the Middle East. China and India accounted for about 68.3% of the imports from Asia. Within the EAC region, Kenya and Tanzania contributed 98.5% of the total imports.