Inflation in Uganda blamed on poor economic policy
06 September 2013, 14:22
Kampala, Uganda - Opposition in Uganda have blamed inflation and increase in Central Bank rates on poor economic policy.
They have warned that that the poor economic policies in the country not only lead to inflation and increased bank interest rates but also worsen the economic situation in the country.
Currently, Uganda's inflation rate has gone above 7 percent. According to the Bank of Uganda, the increase from 5 percent two months ago to the current 7 percent is due to high increase in the prices of food due to a lengthy drought.
Speaking on behalf of opposition, Bukoto central MP and member of the Ugandan Parliamentary Committee on Finance, Mathias Nsubuga said that the recent increase in interest rate by Central Bank will have a negative impact on the economy.
The warning comes after the Central Bank of Uganda increased its loan interest rates to commercial banks from 11 percent to 12 percent on Tuesday.
Nsubuga said,''The increased interest rate by Bank of Uganda is attributed to the bad liberalisation policy that has weakened the Uganda shilling against the US dollar. Bank of Uganda announced an increase in the central bank rate from 11% to 12%, which will lead to increased cost of doing business.''
He noted that there is an urgent need for the government to take extra measures to control the repatriation of dollars. He added that at times, more dollars are taken out of the country than necessary which affects the economy of the country.
Meanwhile, Nsubuga revealed that the Finance Committee has finalised its report after scrutinising the ministerial statement on tax regime.
He said that after examining the policy statements of the Finance Ministry, the National Planning Authority, Uganda Revenue Authority (URA) and the Uganda Bureau of Statistics, Ugandans should expect a reasonable tax regime.
Kampala City Traders Association spokesman, Isah Sekitto also criticised the Central Bank over increase on rates. He said,''Definitely the business community will be affected by the increase. It is unfortunate that the Central Bank has acted so."
But Bank of Uganda governor, Emmanuel Mutebile said that the bank's action is due to an increase in inflation from 5.1 percent to 7.3 percent between July and August this year.
''Although annual core inflation will probably remain above 6 percent for the next few months, by tightening monetary policy now, I am confident that it will fall back towards our policy target of 5 percent," Mutebile observed.
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