Uganda and Kenya retain key policy rates at 10pc to boost economic activities
Uganda has retained its key policy rate at 10 per cent to stimulate household and business spending, and boost economic activities. The Bank of Uganda is projecting higher economic growth for the country during the current fiscal year after the economy recorded a seven to eight per cent growth in the first 10 months of this year. “The strong growth is in part supported by the monetary stance and the associated rebound in private sector-credit growth extension,” said Governor Emmanuel Tumusiime-mutebile. Kenya’s Central Bank maintained the benchmark lending rate at nine per cent, cushioning borrowers from high interest rates as banks continue to grapple with low interest margins. The Bank cited lower inflationary pressures, a pick up in private-sector credit growth and stability in the foreign currency market as reasons for retaining the current benchmark lending rate. RWANDA HAS intensified campaigns to attract citizens to buy government bonds as way of boosting national savings and encouraging the growth of its capital markets. The move has seen the share of banks’ investment in Treasury bonds decline as retail and institutional investors put money into government securities.
The government is seeking to achieve a national savings rate of 18 per cent of GDP and to attain a gross national investment target of 30 per cent of GDP by 2020. Its current national savings rate is estimated at 10 per cent. According to National Bank of Rwanda’s annual report for 2018, there is increasing participation of institutional and retail investors in the government bonds market. The share of institutional investors increased to 54.9 per cent in June this year, from 48.3 per cent in December 2014, while the share of retail investors increased to nine per cent from 1.6 per cent in the same period.
On other hand, the share of banks’ investments in government bonds declined to 36.1 per cent in June this year from 50.1 per cent in December 2014, demonstrating the growing appetite among institutional and retail investors to invest in government bonds. During the 2017/2018 fiscal year, BRN issued two five-year bonds, a seven-year bond and 10-year bond with an average subscription of 239 per cent.