A customer receives money from a teller/Courtesy photo
Commercial banks have increased interest rates further on a tight monetary policy.
According to Ministry of Finance’s Performance of The Economy Monthly Report for June 2023, the weighted average lending rate for Shilling-denominated credit increased to 20.14 percent in May 2023 from 19.27 percent in April 2023.
Likewise, the rate for foreign currency-denominated credit went up from 8.11 percent in April 2023 to 8.5 percent in May 2023.
“The elevated lending rates are reflective of the pass-through effects of the continued tight monetary policy stance,” the recently released report obtained by Business Focus reveals.
The report adds that the value of credit approved for disbursement in May 2023 amounted to Ushs.1557.1 billion, up from Ushs. 1119.9 billion the previous month.
“This represents an approval rate of 67.6% in comparison to 69.8% in April 2023. During the month, manufacturing, personal and household
loans, trade and building, construction & real estate accounted for the largest share of credit extended to the private sector at 23.8% (Ushs. 371.1 billion), 20.6% (Ushs. 320.9 billion), 15.9% (Ushs. 247.5 billion), 15.2% (Ushs. 236.6 billion) respectively,” the report says.
According to the report, the stock of outstanding Private Sector credit continued to increase by 0.32 percent to Ushs.20,529.7 billion in May 2023 from Ushs. 20,464.6 billion in April 2023.
Of the total stock, Ushs. 14,162.55 billion was shilling denominated credit while shs.6,367.87 billion was forex denominated credit.
It should be noted that in June 2023, the Bank of Uganda mantained the Central Bank Rate at 10% to consolidate the gains made towards curbing inflationary pressures and to restore price stability while supporting economic growth.
The decision was premised on core inflation adjusting and remaining stable around its medium target of 5 percent.
