CEO Cnooc Ltd

Updates with details, analyst comments

 
   By Nicholas Bariyo 
 

KAMPALA, Uganda--Uganda's central bank maintained its key lending rate at 9% on Tuesday for the second time in a row, signaling an end to the policy easing stance amid slowing inflation in Africa's top coffee-exporting nation.

Central Bank Governor Emmanuel Tumusiime-Mutebile said the rate would remain unchanged at its lowest level since the country introduced an inflation-targeting monetary policy in 2011 to spur growth, amid receding inflation.

"The Bank of Uganda assesses that the current stance of monetary policy is appropriate given the inflation trajectory and the current state of the economy," Mr. Tumusiime-Mutebile said.

Inflation fell to 1.8% in May from 2% the previous month, as food prices declined following a recovery in agricultural production. Economists at South Africa-based NKC African Economics expect muted inflation to boost the country's growth prospects but warn that planned increases in indirect taxes--especially on fuel--may escalate inflationary pressure later this year.

Uganda's economy will likely grow at 6% in 2018-19, continuing a strong recovery from the 2016 slump, the central bank said. Coffee exports, Uganda's main export crop, may rise 10% to reach a record 5.1 million bags this season.

Policy makers are keen to return to a growth rate of more than 7%, last witnessed in the early 2000s.

But the central bank warned that increasing global oil prices and the rapid depreciation of the local currency pose downside risks to Uganda's growth.

"Global growth has improved, but a couple of uncertainties still linger on and these are the clarity on U.S. economic policies and the pace of monetary-policy normalization in other major economies," said Stephen Kaboyo, managing director at Ugandan fund manager Alpha Capital Partners.

BMI research expects Uganda's growth prospects to remain positive, amid recovering agricultural production and the anticipated commencement of the region's largest unexploited crude reserves. France's Total SA (FP.FR) and China's Cnooc Ltd. (0883.HK) are developing Uganda's crude oil fields where they expect to start pumping as much as 200,000 barrels a day by 2020.

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

(END) Dow Jones Newswires

June 12, 2018 07:45 ET (11:45 GMT)

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