In a bid to counter check advance uncertainty effects that could be caused by the current CoronaVirus disease economic crisis, Bank of Uganda has reduced the Central Bank rate (CBR) by 1% difference to 8%. This is in line with the decline in the macroeconomic condition set over by the COVID-19 pandemic worldwide that has greatly affected trade and business.
The central bank has taken on this uncertainty measure all in hope of ensuring suitable access to credit for normal functioning of the country’s financial markets and other forces that affect the general economics within the country.
According to the central bank, consumer facing sectors have been affected by social distancing measures and thus exposed then to uncertainty market forces. On the other hand the manufacturing and production sectors have declined too due to limited labor and raw materials on account of quarantine measures and disruptions in raw materials inflow respectively.
Over time, the central bank of Uganda has projected a drastic slowdown in the economy during the second half of the 2019/20 financial year coupled with a GDP growth of about 3-4%.
Recently speaking to the press, the governor of Bank of Uganda, Emmanuel Mutebile commented that the downside risks to economic growth outlook had increased.
“Accordingly, the downside risks to economic growth outlook have increased, particularly in the near term and economic activity is projected to remain subdued until the pandemic is contained globally. All though GDP is projected to gradually recover in the second half of the FY2020/21, the emerging output gap is projected to persist until 2022,” He said.
Recently, BoU directed Supervised Financial institutions to defer the payments of all discretionary distributions such as dividends and bonus payments for atleast 90 days effective March 2020 depending on the scale of the COVID-19 pandemic. This is to make sure that Supervised Financial institutions have necessary capital buffers while supporting the real economy.
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