Buy-Import-Export Premium Grade UGANDA VANILLA BEANS                           Buy-Import-Export Un-Refined Raw SHEA BUTTER 

Bank of Uganda mop-up hikes loan charges

Wednesday, 24th August, 2011

AN aggressive cash mop-up by the Central Uganda since the beginning of the year has had little effect on inflation so far, but has pushed up lending rates across the board.

In trying to contain inflation, the Bank of Uganda (BoU) often resorts to selling treasury bills and bonds to suck money out of circulation.

Inflation occurs when prices increase as result of too much money chasing too few goods. The higher the inflation pressure, the more likely the Central Bank will push up its paper sales.

“The whole issue is tightening money supply to fight inflation,” an official familiar with the operations said.

Since the beginning of the year, the bank has stepped up its bond programme, selling sh530b in treasury bonds in the past seven months of the year compared to sh600b the whole of last year.

In addition, the Central Bank has pushed up its bi-monthly treasury bill auctions to about sh95b compared to a maximum of sh85b at the same time last year.

The current 91-day bill rate is 15.88%, the highest since July 2004 when it averaged 19.08%. As a result, bond yields have jumped to record highs. Last week’s two-year bond yield jumped to 15.77%.

As a direct consequence, commercial banks have been raising their base lending rates to above the 20% mark for the first time in more than a year.

Inflation, however, has stayed stubbornly high, topping out at 18.7% in July, the highest in more than two years.

The rising inflation, financial experts believe, is a fallout from the huge campaign spending during the presidential and parliamentary polls in February.

By Paul Busharizi : The New Vision Newspaper

Click here to post comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Africa Uganda Currency and Forex News .





Haven't yet found what you Want...?

If you haven't yet found what you were looking for or you need detailed information about the subject matter on this page

then...

feel free to ask our business travel consultants.



Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.