Bank of Uganda has continued to reduce the Central Bank Rate (CBR) which could signal that the economy is beginning to show signs of recovery.
The CBR is the rate at which the central bank lends commercial banks.
BoU reduced the rate to 9% from 9.5%.
According to the central bank over the next five years, the economic growth is projected to average 6.3%.
Despite the projection,Emmanuel Tumusime-Mutebile, the governor of the bank said yesterday that the growth of
private sector credit remains below historic levels and the cost of credit also remains relatively high more so for micro and small loans while the cost to corporate have declined.
For the central bank to reduce the cost of credit, the central borrowing rate has been reduced has been further reduced to 9% from 9.5 %
“Given the objective of keeping inflation close to the target and the estimated spare capacity in the economy, a cautious easing of the monetary policy is warranted to further boost privates sector credit growth and to
strengthen the economic growth momentum,” Mutebile said.
Despite the continued reduction of the CBR, commercial banks continue to hold onto credit with high lending rates which has forced BoU to mop out over Shs 2.3 trillion from banks since they are not using the money.