(Adds details, background)
KAMPALA, April 2 Uganda's central bank left its
key lending rate unchanged on Wednesday, even
though inflation rose last month, citing concern about sluggish
credit growth and weak exports.
Bank of Uganda Governor Emmanuel Tumusiime-Mutebile said the
economy is expected to grow 6 percent in the fiscal year
2013/2014, compared with 5.8 percent the fiscal year before.
Growth should rise to 6.5 percent next fiscal year, he said.
"Given the outlook for the macro economy over the next 12 to
18 months, the Bank of Uganda believes that a neutral monetary
policy stance is warranted in April 2014," Tumusiime-Mutebile
told a news conference.
Inflation, however, rose to 7.1 percent in March from a
revised 6.8 percent a month earlier, the Uganda Bureau of
Statistics said on Monday. It was the first time inflation had
edged above 7 percent since October 2013.
Tumusiime-Mutebile said annual core inflation is forecast to
increase gradually over the course of next 12 months, to a range
of 6 percent to 7 percent by April 2015.
The central bank has held its key lending rate since cutting
it to 11.50 percent in December.
Tumusiime-Mutebile added that one of the main headwinds to
the economy was the growth in commercial lending.
"Growth of commercial bank credit to the private sector
picked up slightly in February 2014 but remained sluggish, with
year-on-year growth at 6.8 percent, which was below the Bank of
Uganda projections at the beginning of 2013/14," he said.
Traders said the central bank was prudent to hold rates.
"We think a rate hold was possibly the right move, because
although there was a rise in inflation, the more urgent need is
to boost the growth momentum, which would have been undermined
by a rate hike," said Faisal Bukenya, head of market making at
(Reporting Elias Biryabarema; writing by Drazen Jorgic;
editing by Larry King)