By Elias Biryabarema
KAMPALA, Feb 13 (Reuters) – Uganda’s central bank kept its benchmark lending rate UGCBIR=ECI unchanged on Thursday, saying an accommodative monetary policy stance is still needed to support economic growth that could be hit by weak exports.
The bank held the rate at 9% for the second time in a row after cutting it in October from 10% and keeping it unchanged in December.
Bank of Uganda Governor Emmanuel Tumusiime-Mutebile told a news conference that the recent coronavirus outbreak in China, uncertain weather patterns and an invasion of desert locusts could also undermine economic growth.
Uganda this week said it had started spraying swarms of desert locusts that had invaded over the weekend and presented a threat to livestock and crops such as coffee, a large source of foreign exchange for the East African nation.
Tumusiime-Mutebile reiterated the 2019/20 (July-June) economic growth forecast of 5.5-6%, but voiced concern over export weakness.
“(Economic) growth is weighed down by weak growth in exports. Moreover, domestic public sector financing needs continue to grow, increasing risk premiums and pushing borrowing costs for the broader economy higher despite the accommodative monetary policy stance,” he said.
“On the global scene, risks relating to the recent outbreak of Covid-19 (the coronavirus) have lowered the near-term growth outlook. There is considerable uncertainty regarding the duration and severity of the outbreak.”
The IMF this month lowered its growth forecast for Uganda’s economy to 6% in the 2019/20 financial year, down from an earlier projection of 6.3%, citing delays in the public investment needed to start commercial production of crude oil.
Uganda’s annual inflation stood at 3.4% in January, down from 3.6% a month earlier.
Tumusiime-Mutebile said risks to inflation were balanced.
“Food price inflation remains modest, though unpredictable weather patterns and the desert locust invasion create some caution over the trajectory of future crop prices,” he said.
(Reporting by Elias Biryabarema Editing by George Obulutsa and David Goodman)
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