Bank of Uganda (BoU) has maintained the Central Bank Rate (CBR) at 6.5 percent to stimulate the economy that is reeling from the effects of the second Covid-19 induced lockdown.
BoU Governor Emmanuel Tumusiime-Mutebile said at the Monetary Policy Committee (MPC) meeting of August 2021, they decided to keep the Central Bank Rate (CBR) on hold at 6.5 percent.
Mr Mutebile noted that the second Covid-19 wave and the associated containment measures have interrupted the economic recovery.
“Economic growth is expected to noticeably slow down in the quarter to September 2021 due to the pandemic containment measures. Indeed, high-frequency indicators of economic activity indicate that the momentum of economic activity for the quarter to July 2021 subsided,” he said on Thursday, 12 August 2021.
The Governor said the Covid-19 restrictive measures that remain in place will continue to weigh on economic activity, with economic growth projected in the range of 3.5-4.0 percent in Financial Year (FY) 2021/22.
In particular, between Covid-19 stops and starts, tourism is unlikely to return to normal levels any time soon, he explained.
“However, if vaccination picks up in the latter part of the year and movement restrictions are eased, this will allow for gradual economic growth recovery. Nonetheless, the lingering impact of the pandemic on private sector finances is expected to weigh on output over the next two years,” BoU said.
According to BoU, economic growth is projected to return to 6-7 percent in FY2024/25, indicating that the economic activity is expected to remain well below the pre-pandemic path for an extended time.
“A rebound of economic activity will be sustained by an acceleration in private consumption due to pent-up demand and strong growth in external demand which should contribute to a solid pickup in exports. In addition, a gradual return of tourism, the Final Investment Decision (FID) in the oil sector and broad-based improvements in business confidence should also provide support to growth,” BoU added.