Kampala. The International Monetary Fund (IMF) has supported Bank of Uganda’s decision to maintain the Central Bank Rate (CBR) at 9 per cent.
In an interview on Tuesday, Ms Mira Clara, the IMF country representative, said the Central Bank must watch the market in order to curb the threat of inflationary pressures.
“Inflation remains low, and has stabilised [but] the current downward trend is unlikely to continue [given] the exchange rate depreciation [and] the fiscal stance is likely to have an impact on inflation going forward,” she said, emphasising that BoU had taken the right decision.
The shilling has kept a volatile stance since the beginning of the year breaching most of its resistance levels.
Yesterday the unit closed at Shs3,828 against the dollar and analysts have predicted it is likely to weaken further.
On Tuesday the Central Bank said it would stay the CBR at 9 per cent citing the volatility of the shilling.
Mr Emmanuel Tumusiime Mutebile, the BoU governor, said the Central Bank had accessed the inflation trajectory and the current state of the economy, before fixing the CBR at 9 per cent.
In the medium term, Mr Mutebile said, economic growth prospects remain stable but “the contribution of exports to GDP growth will be negative as a result of an acceleration in imports”.
According to data from Uganda Bureau of Statistics Uganda, the economy is expected to grow at 6 per cent but the threat of the exchange rate volatility is likely to loam large.
Dr Adam Mugume, the BoU director for research, said the shilling had since June depreciated by about 1.6 per cent worsened by an increase in imports, which grew by 17 per cent compared to growth of 11 per cent in the exports sector.
Mr Stephen Kaboyo, the Alpha Capital, managing partner, told Daily Monitor there were domestic risks such as high fuel prices which remain a threat.