Uganda Slashes Key Interest Rate to Record Low of 8%

(Bloomberg) --

The Bank of Uganda reduced its benchmark interest rate, joining scores others around the world that have made similar moves to prop economies threatened by the novel coronavirus.

The monetary policy committee cut the rate by 1 percentage point to 8%, the lowest level since the central bank introduced the policy rate in 2011 at 13%.

The central bank also reduced the rate at which the public may rediscount their securities to 12% from 13%. It lowered the bank rate, at which it gives credit to commercial lenders, to 13% from 14%, according to an emailed statement. Expansion in 2019-20 could slow down to between 3% and 4%, according to the central bank.

The East African nation that's the continent's biggest coffee exporter had 48 cases of Covid-19 by Sunday. To mitigate effects of the virus, the finance ministry wants $284 billion shillings ($75 million) in extra budget spending.

While a “warlike policy from the central bank is necessary at this stage, it will not work independently,” according to Stephen Kaboyo, managing director at Alpha Capital Partners. “The government must move in tandem and consider other fiscal measures that will protect businesses and minimize the effects on the broader economy.”

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