Mutebile predicts lower interest rates
Nov 28, 2007
THE entry of eight new banks into the market and the Government’s fiscal plan will be key factors in lowering interest rates, the central bank governor, Tumusiime Mutebile, has predicted.
By Sylvia Juuko
THE entry of eight new banks into the market and the Government’s fiscal plan will be key factors in lowering interest rates, the central bank governor, Tumusiime Mutebile, has predicted.
The governor noted that while banks were in the business to make money, the minimum interest rates should be calculated as inflation, plus risk and profit.
“The answer to reducing rates is to force banks to compete. Over the last 10 years, we have been forcing banks to compete.
“We were not doing enough because we had stopped new entrants into the market,†he told delegates at the recent Commonwealth Business Forum at the Sheraton Kampala Hotel.
“The moratorium was lifted three years ago and in the past year, Bank of Uganda has licensed three new banks and one local one.
“There are four more banks in the pipeline which I am going to license bringing the total to eight banks. I can bet my bottom dollar that competitive pressure will start and interest rates will fall,†he said in response to concerns from the business community regarding high interest rates.
Prior to the entry of the new banks, the financial sector comprised of 15 commercial banks, which charge interest rates of up to 26%.
Mutebile, however, noted that the central bank needed to keep the Ggovernment in check to trim its fiscal deficit.
THE entry of eight new banks into the market and the Government’s fiscal plan will be key factors in lowering interest rates, the central bank governor, Tumusiime Mutebile, has predicted.
The governor noted that while banks were in the business to make money, the minimum interest rates should be calculated as inflation, plus risk and profit.
“The answer to reducing rates is to force banks to compete. Over the last 10 years, we have been forcing banks to compete.
“We were not doing enough because we had stopped new entrants into the market,†he told delegates at the recent Commonwealth Business Forum at the Sheraton Kampala Hotel.
“The moratorium was lifted three years ago and in the past year, Bank of Uganda has licensed three new banks and one local one.
“There are four more banks in the pipeline which I am going to license bringing the total to eight banks. I can bet my bottom dollar that competitive pressure will start and interest rates will fall,†he said in response to concerns from the business community regarding high interest rates.
Prior to the entry of the new banks, the financial sector comprised of 15 commercial banks, which charge interest rates of up to 26%.
Mutebile, however, noted that the central bank needed to keep the Ggovernment in check to trim its fiscal deficit.