By Nicholas Bariyo
KAMPALA, Uganda--Uganda's central bank held its benchmark lending rate at 10% on Tuesday citing continued risks to inflation, despite a recent easing of prices across Africa's top coffee exporter.
While inflation eased for the fourth consecutive month in May to 6.2% from 8% in April, a tight monetary stance is necessary to consolidate the gains achieved against consumer price inflation since the start of the year, Michael Atingi-Ego, deputy governor at the Bank of Uganda, told a news conference in Kampala.
"Potential downside risks to growth include protracted weak global growth, reduced demand for Ugandan exports and risks to supply-chain disruptions," he said. "The Bank of Uganda projects that the current policy stance remains appropriate to contain domestic-price pressures while supporting economic recovery."
Uganda, an upcoming oil producer, has maintained its interest rate at 10% since October last year to tame rising inflationary pressure. The decision contrasted projections from Oxford Economics Africa, which had hoped for a reduction in the interest rate after months of easing prices.
"We believe that Uganda has reached the end of its policy-tightening cycle," Oxford said in a note "The significant drop in the food inflation rate comes as a positive surprise as we envisioned food inflation to take longer to cool."
The central bank expects annual economic growth to recover to more than 7% from 2025 onward from the current estimated 6% when Uganda starts crude oil production. France's TotalEnergies and China's Cnooc are developing 230,000 barrels-a-day oil fields, along Uganda's western border with the Democratic Republic of Congo, expected to come on stream in 2025.
Write to Nicholas Bariyo at Nicholas.Bariyo@wsj.com
(END) Dow Jones Newswires
06-13-23 0717ET
