Borrowing Costs Up
May 15, 2003
Interest rates are inching towards 20% as the shilling weakness aginst the dollar continues.
By Andrew Kanyegirire
Interest rates are inching towards 20% as the shilling weakness aginst the dollar continues. The shilling is now exchanging at an average sh2008 to a dollar.
In February this year the shilling stood at sh1877 sh1944 in March. By the start of this week, the rate crossed the sh2000 barrier.
In an attempt to cover themselves against these trends which tend to increase the risk of defaults on loans, commercial banks often have to raise their interest rates.
On Monday Barclays Bank raised its prime interest rate from 16.50% to 18.50%. On average, commercial bank’s lending rates on the shilling have been edging up to the 18% mark over the past few months.
At Crane Bank, Mr. R. Sivandam a senior manager at the bank’s forex section, said they were looking to make a decision about their interest rates soon.Higher returns on treasury bills can also push up interest rates.
Meanwhile Bank of Uganda (BOU) say there is no cause for alarm concerning the shilling position.
“There’s no need to panic, the rate will be going down,†Emmanuel Kalema Musoke a Principal Economist with the Public Relations Department at the BOU said in mid-week.
“We send money into the market when the shilling falls too fast,†he added.
The higher demand for dollars compared to available supply has weakened the shilling exchange rate.
Ends
Interest rates are inching towards 20% as the shilling weakness aginst the dollar continues. The shilling is now exchanging at an average sh2008 to a dollar.
In February this year the shilling stood at sh1877 sh1944 in March. By the start of this week, the rate crossed the sh2000 barrier.
In an attempt to cover themselves against these trends which tend to increase the risk of defaults on loans, commercial banks often have to raise their interest rates.
On Monday Barclays Bank raised its prime interest rate from 16.50% to 18.50%. On average, commercial bank’s lending rates on the shilling have been edging up to the 18% mark over the past few months.
At Crane Bank, Mr. R. Sivandam a senior manager at the bank’s forex section, said they were looking to make a decision about their interest rates soon.Higher returns on treasury bills can also push up interest rates.
Meanwhile Bank of Uganda (BOU) say there is no cause for alarm concerning the shilling position.
“There’s no need to panic, the rate will be going down,†Emmanuel Kalema Musoke a Principal Economist with the Public Relations Department at the BOU said in mid-week.
“We send money into the market when the shilling falls too fast,†he added.
The higher demand for dollars compared to available supply has weakened the shilling exchange rate.
Ends