The Bank of Uganda on Monday held its key lending rate unchanged for the fifth consecutive meeting, leaving it at the all-time low of 6.5 per cent, citing the need to support economic growth and on-target inflation.
The rediscount rate and bank rate were maintained at 9.5 per cent and 10.5 per cent, respectively.
The bank said recent data showed that the economy “was on a strong rebound” with the relaxation of Covid-19 lockdown restrictions stimulating domestic demand and adding to “the gains of robust external demand”. It also noted that the omicron variant of the coronavirus has had a “relatively small” effect on economic activity, leading to a more positive growth outlook than previously projected.
The bank said it expects Uganda’s GDP to grow by about 6 per cent in 2022. However, it also warned that external factors — “lower global growth, continued supply chain disruptions, and tighter global monetary and financing conditions” — could restrain growth. “In addition, the recovery might remain fragile and uneven across sectors,” it said in its monetary policy statement.
Looking ahead, the bank said its policy stance will change “depending on how fast the economy recovers relative to its long-run growth path and how quickly inflation evolves to its medium-term target [of 5 per cent].”
The bank also said it will “continue with targeted credit relief measures for the education and hospitality sectors” that were affected by the extended lockdown, and also maintain its liquidity assistance program for financial institutions “until the economic situation normalises.”
