The Bank of Uganda (BoU) on Monday cut the key interest rate to a record low of 8% a move meant to mitigate the effects of COVID19. BoU governor Emmanuel Mutabire said that the pandemic has led to the deterioration of macroeconomic conditions due to the disruption of global supply chains, travel restrictions, and measures to limit contact between people. This has, in turn, led to a sudden decline in demand for products and services.
Further, BoU projects Uganda’s economic growth will slow down in the second half of FY19/20 with the full-year growth expected to be between 3% to 4%. The governor noted that appreciation of the US dollar against other major currencies had resulted in volatility in the domestic foreign exchange market. The Ugandan shilling depreciated against the US dollar by 2.2% between February and March 2020.
Some of measures put in place by the Ugandan government to ease financial stress include;
- commercial banks ordered to defer discretionary payments such as bonus and dividends for 90 days effective March 2020.
- granting exceptional permission to supervised financial institutions (SFIs) to restructure corporate and individual customers loans
In addition, Uganda’s March consumer price index (CPI) reveals that headline inflation remained subdued at 3% compared to 3.4% recorded in February.