Bank of Uganda cuts main lending rate to 9.0%

The central bank of Uganda recently made a surprise decision to cut its key lending rate by 100 basis points to 9.0 percent in an effort to revive economic growth in the country. Oscar Emasu, a research analyst at Crested Capital, shared his insights on this move during a recent interview on CNBC Africa. Emasu noted that the decision came at a time when economic growth has slowed down and inflation has remained subdued. By reducing the benchmark lending rate, the central bank hopes to stimulate demand, lower borrowing costs, and boost economic activity. While the governor of the central bank has projected a growth rate of 6.0 to 6.3 percent for the country in the upcoming fiscal year, Emasu emphasized the importance of considering other factors such as the fiscal deficit and global economic conditions to achieve this target. He also pointed out that developments in the oil sector could further support economic growth. Inflation in Uganda has been on a downward trend, with food prices and competition in the telco sector contributing to the subdued inflation figures. Emasu cautioned that the upcoming festive season may lead to a slight uptick in inflation as demand increases. The central bank has faced scrutiny in recent years, prompting calls for support from the International Monetary Fund to enhance its public image and credibility. Emasu highlighted the need to strengthen the financial sector stability and maintain favorable borrowing costs to bolster public trust in the central bank. Additionally, the Finance Trust Company of Uganda Bank Limited has decided to reverse its decision to acquire disputed properties sold by the Bank of Uganda following a court case that ruled in favor of the former shareholders. While the specific details of the agreement between the two parties remain undisclosed, this development signifies a resolution to the dispute. On the commercial side, Bank of Baroda experienced a decrease in its net earnings in the first half of 2019 due to an increase in non-performing assets and cautious borrowing practices. The bank's performance reflected a broader trend among listed banks in Uganda, with factors such as provisioning for taxes impacting their financial results. As Uganda navigates economic challenges and implements monetary policy measures, the focus remains on sustainable growth and financial stability to drive the country's development.