BUSINESS: BoU maintains lending rate at 7% amid crawling economic recovery over Virus Pandemic

BUSINESS: BoU maintains lending rate at 7% amid crawling economic recovery over Virus Pandemic

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KAMPALA – Bank of Uganda has kept the Central bank rate (CBR) at 7 per cent for the month of August amid slow economic recovery over coronavirus.

BOU Governor Emmanuel Tumusiime-Mutebile on Monday said the CBR indicates the direction of interest rates and with this BOU expects commercial banks to provide more money to Ugandans so that they can spend.

It warns that increasing Non-Performing Loans (NPLs) and high lending interest rates could delay recovery of loan extensions to pre-COVID levels.

Mutebile is, however, optimistic that economic growth could turn out stronger than projected if the spread of the virus is contained, or if a vaccine or effective treatment is available earlier than is currently being assumed.

He said the economy in 2020/21 is projected in the range of 3.0-4.0 per cent, further increasing to 5.0-6.0 per cent in 2021/22b financial year.

“Low exports of goods and subdued tourism receipts are projected to continue to weigh on economic growth given weaker global demand,” Mutebile said.

Mutebile is, however, optimistic that economic growth could turn out stronger than projected if the spread of the virus is contained, or if a vaccine or effective treatment is available earlier than is currently being assumed.

He added that many consumers are expected to be hesitant to resume their previous spending patterns, partly due to fears of contracting the virus and uncertainty about earnings. He added that even those whose incomes were not affected may increase their need for precautionary savings.

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