Mutebile, who was reading the February monetary policy statement on Thursday afternoon, said very few banks have taken his advice but he continues to struggle with most of them so that they can reduce lending rates for Ugandans.
Bank of Uganda Governor Emmanuel Tumusiime-Mutebile has said that
commercial banks have flatly refused to take his advice as regards to reducing
interest rates.
Mutebile, who was reading the February monetary policy statement on Thursday,
said very few banks have taken his advice but he continues to struggle with
most of them so that they can reduce lending rates for Ugandans.
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Bank of Uganda has for over the past year kept the Central bank rate (CBR), a
signal rate that tells banks whether the economy outlook is good and therefore
they lend cheaply too, low and now at 9%.
The commercial banks are expected to follow suit by reducing their interest
rates to enable more people to borrow and invest. However, they have refused to
do so, keeping their lending rates at the average 20%. This is out of the reach
of many Ugandans, meaning many can hardly access finance to invest.
This has been a lot of people’s complaint that BOU’s policy rates, that are
supposed to translate into lower borrowing rates, were having less impact. The
governor's admission that they are not taking his advice indicates that either
banks don’t trust BoU’s assessments of the economy or the environment simply
doesn’t favour reduction in rates.
Mutebile said that whatever the Central Bank puts out is absolutely true and
the banks should be taking its advice.
Meanwhile, Mutebile said he expected the economy to grow at between 5.5% and 6%
in the 2019/2020 financial year, below the growth, it posted in 2018/19. It is,
however, in line with projections from other entities.
He said growth will be affected by the fact that Uganda’s exports have not
grown fast.
Adam Mugume, the executive director research at BOU, said apart from gold, all
the other things Uganda exports have fallen.
Mutebile said the coronavirus in China and desert locusts reported in northeastern
Uganda are also likely to affect the economy although he can’t tell how big the
impact will be now.
