Bloomberg News

Uganda Cuts Rate Eighth Time This Year to Spur Growth

November 01, 2012

Uganda Cuts Rate for Eighth Time This Year to Spur Growth

Workers unload raw coffee beans to be dried and processed at the Kyagalanyi Coffee Ltd export factory in Kampala. Economic growth in the 12 months through June slowed to 3.2 percent from 6.7 percent a year earlier after services and the industrial sectors fell, according to the Uganda Bureau of Statistics. Photographer: Trevor Snapp/Bloomberg

(Corrects year rate was introduced to 2011 in first paragraph)

Uganda’s central bank cut its key interest rate to stimulate borrowing and spur economic growth, the eighth reduction since introducing the benchmark in July 2011.

The Bank of Uganda lowered the central bank rate to 12.5 percent from 13 percent in October, Governor Emmanuel Tumusiime- Mutebile told reporters today in the capital, Kampala. It raised the rate by 10 percentage points last year to a peak of 23 percent to protect the currency against depreciation and fight inflation that reached 30.5 percent in October 2011.

The central bank will probably prefer to cut the rate “marginally” as it guards “against accelerated decline in the interest rates and provides a little more support for the shilling in the short term,” Stephen Kaboyo, the managing director of Alpha Partners, a Kampala-based research company, said by phone before the decision.

The central bank said the interest rate on 91-day Treasury bills was 9.688 percent at an auction yesterday.

Economic growth in the 12 months through June slowed to 3.2 percent from 6.7 percent a year earlier after services and the industrial sectors fell, according to the Uganda Bureau of Statistics. Growth may recover to 5.4 percent this fiscal year, it said.

Inflation in the East Africa’s third-biggest economy slowed to 4.5 percent in October from the revised 5.5 percent in September after prices of some food items dropped, the Uganda Bureau of Statistics said yesterday.

To contact the reporter on this story: Fred Ojambo in Kampala at  fojambo@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson in Nairobi at pmrichardson@bloomberg.net


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