Kampala traders reject new interest rates

Feb 03, 2012

Kampala City Traders Association has rejected the Central Bank reduction of the lending rates by a mere one percent.

By Noah Jagwe            

Kampala City Traders Association (KACITA) has rejected the Central Bank reduction of the lending rates by a mere 1%.

Bank of Uganda Governor Tumusiime Mutebile on Wednesday announced a reduction in central bank rate (CBR) 1 percent from 23% to 22% for February. He was confident that inflation would slow down to single digits this year.

The Governor was optimistic that banks would respond by reducing intrest rates, especially since inflationary pressures have continued to abate.
 

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DP boss Nobert Mao and other participants at the meeting. Photo by mark Owor

However, Kampala traders on Friday said a 1 percent reduction is still too low.

KACITA spokesperson said, “Too much of our money was already taken, we want the governor to address us on the issue”.

He made the remarks at the 27th session of the state of the nation Platform organized by the civil society, Advocates Coalition for Development and Environment in Kampala.

Sekitto said they will convene a meeting of KACITA members to forge a way forward.

He said they are waiting for an official communication from the President over the matter as a  follow up on a meeting they had with him.
 


 

Sekitto accused the Central Bank of being elective on policies to fight inflation in the country.

“We don’t know why the Governor chooses bank rate policy yet there other measures” he said.

Sekitto also wants the government to give incentives to traders to enable them make proper investment plans.

Bank of Uganda increased the central borrowing rate from 13% in July to 23% in November as inflation soared to as high as 30.4%, mainly driven by a sporadic rise in food prices.

The Central Bank also revealed that the rise in interest rates, which took place during the second half of 2011, has brought about a marked declaration in the growth of bank lending.

Credit to the private sector fell from 33.8% in November 2011 to 27.8% in December.
Shilling-denominated loans also fell to 24.4% from 28.4%.

Since hitting its peak in October, the headline inflation rate released on Tuesday slowed to 25.7% in January.

Core inflation, which excludes food crops, fuel, electricity and metered water, is still at 28.1%.

 

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