Uganda and Kenya re­tain key pol­icy rates at 10pc to boost eco­nomic ac­tiv­i­ties

The East African - - MARKETS -

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.

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