By Nicholas Bariyo
KAMPALA--Uganda's central bank held its benchmark lending rate at 6.5% on Monday, as Africa's top robusta-coffee grower maintains interest rates at record lows to spur growth.
The Bank of Uganda said that although the economy is recovering from pandemic-related disruptions, tight global monetary and financing conditions and continued supply-chain disruptions could weigh on the country's growth.
"There could be a loss of growth momentum as global factors turn adverse," Michael Atingi-Ego, deputy governor at the Bank of Uganda said in a statement, adding, "risks to growth outlook remain tilted to the downside."
After contracting by 1.5% last year, the central bank expects Uganda's economy to rebound by at least 7%, boosted by investments in infrastructure and recovering tourism. Earlier this month, TotalEnergies SE and China's Cnooc Ltd. signed an agreement to kick-start a $10 billion project to develop Uganda's crude oil reserves, estimated to contain as much as 6.5 billion barrels of crude.
However, uncertainty about the evolution of the pandemic, inflation and financing of public investments could hurt investment in the oil industry, hampering growth, Mr. Atingi-Ego said.
"The most significant risk is the duration of disruptions to the global-production chain and related stronger inflation pressures."
Uganda's coffee exports jumped 21% last season, to a record 6.5 million bags. Uganda, which grows mainly the robusta variety, exports the bulk of it's coffee to Europe, the U.S. and Asian markets.
Oxford Economics Africa said that Uganda, which imposed stringent measures to contain the spread of the coronavirus, will take years to fully recover.
"There is significant damage to the education, hospitality and entertainment industries that will have lasting effects and take years to fix." Oxford Economics Africa said.
Write to Nicholas Bariyo at nicholas.bariyo@wsj.com @Nicholasbariyo
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02-14-22 0830ET
