BOU governor urges government to control its borrowing appetite

Bank of Uganda is to review the credit management policies with the aim of facilitating private sector credit growth which is currently being influenced by government domestic borrowing.

According to Twinemanzi Tumubweine, the executive director supervision at Bank of Uganda, the cost of credit still remains high affecting the performance of businesses due to increased government domestic borrowing.

Bank of Uganda is projecting Uganda’s economic growth at 6.3% in this running financial year 2018/2019 against the 5% that was registered last financial year.

“The strong growth is in part supported by our accommodative monetary stance and the resultant favorable financial conditions, fiscal impetus and multiplier effects of public infrastructure investments” Mutebile

“Last year in December we has less information on what was going on in different sector but the updated information show growth and our projections are on the right track. “Adam Mugume executive director for research

But according to the central bank governor Prof. Emmanuel Tumusiime – Mutebile this can be attained if the country registers growth in private sector credit.

The governor adds that the projected economic growth also risks weather related constraints to agricultural production and challenges relating to the financing of public investment programmer.

Although private sector credit growth has been on a recovery path since January 2018, it remains below its historical trend and its contribution to economic growth could be weighed down by the relatively weak performance of foreign currency-denominated loans,” said Prof. Emmanuel Tumusiime – Mutebile

In order to facilitate private sector credit growth, the executive director supervision at bank of Uganda Twinemanzi Tumubweine notes that there is need to control government’s appetite for domestic borrowing which is stunting economic growth.

With the forces of demand and supply, government domestic borrowing is greatly affecting the sector therefore there is need for government to reconsider its decision to borrow internally noted Twinemanzi Tumubweine.

However, Bank of Uganda has maintained the Central Bank Rate (CBR), a benchmark lending rate for commercial banks at 10 percent in February 2019 raised from the 9% that was announced in November 2018.