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This is how COVID-19 is impacting Uganda’s growth outlook
Uganda’s Central Bank cut its benchmark lending rate by 100 basis points, taking it down to 7 per cent, to support the East African nation’s economy as it downgraded projected growth. According to the government, the pace of Uganda’s economic expansion is expected to decline by more than half in the financial year to June 30 to between 2.5-3.5 per cent. Oscar Emasu, Research Analyst at Crested Capital joins CNBC Africa for more.
Fri, 19 Jun 2020 10:44:33 GMT
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AI Generated Summary
- Uganda's Central Bank cuts benchmark lending rate to 7% to support economy amidst projected growth decline of 2.5-3.5% for the current financial year.
- Efforts to ensure financial stability and borrower support include lowering funding costs and proactive interest rate reductions by the Central Bank.
- Central Bank and banking associations provide reassurance of liquidity support and emphasize the stability of financial institutions, while interventions help stabilize the Ugandan shilling.
Uganda's Central Bank has once again taken measures to support the nation's economy by cutting its benchmark lending rate by 100 basis points to 7%. The East African nation has seen a downgrade in projected growth, with the government anticipating a decline of more than half in economic expansion for the financial year ending June 30, to a range of 2.5-3.5%. Oscar Emasu, a Research Analyst at Crested Capital, discussed the current economic situation in Uganda and the impact of these decisions. Emasu highlighted the importance of financial stability and support for borrowers, including lower funding costs. The Central Bank has proactively reduced interest rates over the past few months, signaling its commitment to aiding economic recovery. Despite concerns about liquidity strain, both the Central Bank and banking associations have reassured the public of adequate support in case of any financial challenges. Emasu also praised the stability of the Central Bank and financial institutions, citing sufficient liquidity levels and capital reserves. Measures such as raising funds through domestic markets and delaying dividend payments have been implemented to ensure financial stability during uncertain times. The Ugandan shilling faced depreciation against the US dollar and regional currencies due to capital outflows earlier this year. However, recent interventions by the Central Bank in the forex market have helped stabilize the shilling, with depreciation now standing at under 1.4%. Emasu attributed this stability to muted demand for the currency and steady inflows from exports. Overall, Uganda's economic outlook remains challenging, but efforts by the Central Bank and financial institutions aim to cushion the impact and facilitate recovery.
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