Despite the ongoing conversation that some Bank of Uganda officials printed an extra Ush90b, which was suspiciously loaded on a BoU chartered plane into Uganda’s economy, Governor Emmanuel Tumusiime Mutebile has this afternoon decided to maintain the Central Bank Rate at 10% amidst the fears.
While reading the Monetary Policy Statement for June, Mutebile told the media at BoU headquarters that the inflation outlook over 12-months horizon was largely unchanged compared to the April 2019 forecast round, although he added that “risks remain elevated.”
“Preliminary estimates by the Uganda Bureau of Statistics (UBOS) indicate that the economy expanded by 6.1% in the Financial Year 2018/19, partly as a result of strong growth in household consumption.
“Growth was largely supported by the accommodative monetary policy stance and the resultant growth in private sector credit, fiscal impetus and multiplier effects of public infrastructure investments, ensuing strong domestic demand conditions and improved agricultural performance,” said Mutebile.
He said, indeed, economic growth is projected at 6.3% in the financial year 2019/20. “Over a 2-5 year horizon, real economic growth is forecast to be in the range of 6.5 and 7%, supported by strengthening private sector activity, foreign direct investment, public infrastructure investment and a pick-up in the extractive sector activities,” said Mutebile.
Mutebile added that downside risks to economic growth remain as previously stated. “On the external scene, the escalating global trade tensions could weaken Uganda’s external position and lead to volatility in the domestic foreign exchange market.
“On the domestic scene, weather-related constraints to agricultural production, delays in the implementation of public investment programmes, and supply-side constraints to growth in the private sector could dampen economic activity,” stressed Mutebile.
This week, about six Bank of Uganda officials have been under investigation over the alleged printing of unauthorized extra currency following the recovery of crucial documents during a joint security search at the suspects’ homes.
According to the different investigating teams and Police spokesperson Fred Enanga, when they raided homes of six senior bank officials, they recovered documents which suggest printing of unauthorized excess currency notes.
“The searches were done in the homes of the officials and a number of documents were recovered. With time, we shall get how much was involved, how much (money) has been recovered, what was genuine (currency), what was unofficial, but genuine money,” Enanga told the media in Kampala.
Last week, the State House Anticorruption Unit led by Col Edith Nakalema and police quizzed several BoU officials in charge of currency, procurement and security and officials from the Customs Department, airport police officers and Civil Aviation Authority (CAA) staff.
Mutebile avoided commenting on the ongoing Saga arguing that investigations are going on.
“We ordered for 20 pellets if am to say but what was brought on the Chartered Cargo Plane were 25 Pellets. We want to know where the extra five pallets came from, to whom were they going and for which purpose. This is an investigation am still waiting for and of which, I have not been updated yet,” said Mutebile.
Mutebile said, overall, the Monetary Policy Committee assesses that the risks to the projected inflation path are roughly balanced.
“Based on this assessment, the MPC has decided to maintain the CBR at 10%. The band on the CBR will remain at +/-3 percentage points and the margin on the rediscount rate at 4 percentage points on the CBR.
“Consequently, the rediscount rate and the bank rate have been set at 14% and 15% respectively,” said Mutebile.
Razia Khan Managing Director, Chief Economist, Africa and Middle East, Standard Chartered Bank commenting on the maintained Central Bank Rate said, “Although Bank of Uganda has kept its CBR on hold at 10%, its forecast for core inflation (seen peaking at 6.4% in Q1 2021), and Uganda’s robust growth backdrop (a preliminary estimate of 6.1% from UBOS for FY 19, supported by household consumption), suggests that future risks are likely to be tilted towards further tightening.
“However, with inflation still well-behaved, the Ugandan shilling relatively stable, and the Fed turning more dovish, we see little pressure on the BoU to alter its monetary policy stance, for now.”
BY PAUL TENTENA