KAMPALA —Bank of Uganda (BoU) has kept the Central Bank Rate (CBR) at 9 percent amid slow economic growth.
Speaking at the release of the December Monetary Policy Statement in Kampala on Monday, December 09, 2019, BoU Governor Emmanuel Tumusiime-Mutebile said since the beginning of 2019, there has been moderate economic growth driven by both slowing global activity and domestic factors.
“Indeed, in the first 10 months of 2019, tourism receipts are estimated to have grown at a lower rate and merchandise exports, excluding gold and re-exports, contracted reflecting moderating external demand. On the domestic scene, moderation of domestic demand conditions could also have contributed to the slowing of economic activity,” Mr Mutebile said in a statement.
“Against this backdrop, the BoU has decided to keep the CBR at 9 percent. The band on the CBR will remain at +/-3 percentage points and the margin on the rediscount rate and bank rate will remain at 4 and 5 percentage points on the CBR, respectively. Consequently, the rediscount rate and the bank rate remain at 13 percent and 14 percent, respectively,” he added.
The Governor said that persistent global geo-political tensions, uncertainty around trade policies and softening domestic private sector investment spending could generate headwinds to economic growth.
“In addition, public sector financing needs have risen amidst limited fiscal space, raising the prospect of further pressure on the domestic borrowing costs,” he said.
The Governor said overall, economic growth, which is in the range of 5.5-6.0 percent, is expected to be sustained into 2020.
“This projection remains subject to downside risks, mainly stemming from uncertainties in the global economy. Over the medium term, monetary and fiscal impetus is expected to support stronger GDP growth. As a result, private sector investment will increase, providing additional support to the economic growth outlook,” he said.
The Consumer Price Index (CPI) data for November 2019, released by Uganda Bureau of
Statistics (UBOS), indicates that inflation remained subdued. However, annual headline and core inflation rose to 3 percent and 2.9 percent, respectively from 2.5 percent and 2.6 percent in October 2019. The increase in inflation was in part driven by higher food crop prices, and Energy, Fuel and Utilities (EFU) prices.
Food crops inflation increased from minus 0.9 percent in October 2019 to 0 percent in November 2019, while EFU inflation rose to 7.4 percent in November 2019 from 5.1 percent in October 2019. A relatively stronger shilling and subdued domestic demand contributed to moderation of the increase in inflation.