Uganda's Central Bank Cuts Key Lending Rate — Update

By Nicholas Bariyo

KAMPALA, Uganda--Uganda's central bank slashed its key lending rate to 9.75% from 10%, as Africa's top coffee exporting nation extends its policy-easing stance amid increased investments in its oil-and-gas industry.

Inflation is projected to ease despite the recent increase in food prices, Michael Atingi-Ego, deputy governor at the Bank of Uganda, told a news conference in Kampala. The inflation rate slowed to 3% in September, from 3.5% in August, remaining below the central bank target of 5%.

"Inflation remains subdued, reflecting the unwinding of the global shocks, stable exchange rate partly due to sturdy receipts from coffee exports," he said.

The rate cut is the second in a row since August, when Uganda's central bank slashed the lending rate by 25 basis points citing easing inflationary pressures, due to reduced food and fuel prices.

The rate decision was in line with most analysts's expectations, as higher earnings from coffee exports and increased investments in Uganda's oil industry continue to support the local currency.

Uganda is expected to start crude oil exports next year, when TotalEnergies and China's CNOOC start pumping up to 230,000 barrels a day from fields along the Western border with the Democratic Republic of Congo.

"Considering that foreign investments in the country's oil and gas sector are set to increase in the coming months, we do not foresee major weakness in the currency," said Theo Klein, an economic analyst with Oxford Economics Africa. "We expect local transport prices to remain on a disinflationary trend."

Uganda, which exports more coffee beans than any other country in Africa, registered a 47% jump in coffee-export earnings to $1.35 billion in the twelve months ended in August. Coffee export volumes also rose to 6.4 million 60-kilogram bags from 6.08 million bags during the same period a year earlier.

Write to Nicholas Bariyo at nicholas.bariyo@wsj.com

(END) Dow Jones Newswires

October 07, 2024 07:24 ET (11:24 GMT)

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