Credit to Uganda’s private sector rose to a six-month high in August as the economy continued a slow but steady recovery path, the central bank said on Tuesday ahead of a meeting of its Monetary Policy Committee.
Loans to the private sector rose steadily in the six months to August to reach Shs22.6tn ($6bn), the highest since February. This was despite a slight month-on-month decline in the business confidence index.
The indicator, a gauge of the financial sector’s contribution to economic activity, also reversed two months of decline, rising 7 per cent in the year to August. It also picked up on the month, rising by 1.3 per cent compared with 0.6 per cent in July.
Headline inflation fell to 2.7 per cent in September from 10.4 per cent at the start of the year, the lowest level in almost two years, the statistics bureau said last week. The closely watched core inflation rate also fell for the eighth consecutive month to 2.4 per cent.
Good weather and harvests helped bring food inflation down from 25.6 per cent in October last year to 7.9 per cent last month. The energy, fuel and utilities price cluster also fell from 15.2 per cent to negative 1.2 per cent over the same period, helping to cool prices.
With pump prices under pressure from higher global crude oil prices on the world market, the MPC is expected to keep the central bank rate on hold at 9.5 per cent when it meets in Kampala on Thursday.
The Ugandan shilling has lost 1.95 per cent against the US dollar since the start of the year, weighed down by the World Bank’s suspension of future funding in August over concerns about the controversial Anti-Homosexuality Bill passed by the country’s parliament earlier this year.
A petition against the law was lodged with the Constitutional Court in Kampala last week, and the shilling could receive a boost if the court issues an injunction against its implementation, as is customary in Ugandan jurisprudence.
The trade deficit widened to $402mn in August, the highest since October last year, as importers ramped up purchases ahead of the traditionally busy Christmas period. Foreign exchange reserves, at $3.9bn in August and equivalent to 3.3 months of import cover, are at their second highest level in 12 months, behind only June’s $4bn.
Yields on 91-day Treasury bills fell marginally by three basis points on the month, while those on 364-day Treasury bills moved by the same margin but in the opposite direction. After falling for three consecutive months to close at 17.9 per cent in July, the commercial bank lending rate rose to 18.4 per cent in August.
