KACITA calls for reduction of central bank rate
Kampala City Trader’s Association-KACITA has called for the reduction of the Central Bank Rate-CBR, saying it has made borrowing from commercial banks very expensive.
CBR is the rate that is used by the Central bank to implement or signal its monetary policy stance. It is often set by the monetary policy committee with the intention of increasing or decreasing economic activity.
Recently, the Bank of Uganda-BoU raised the Central Bank Rate (CBR) from 7.5 percent to 8.5 percent in a bid to contain inflation and stabilize the economy. The Monetary Policy Committee of the Bank of Uganda usually sits after every two months to determine the direction of the cost of money for the next two months.
However, this time around, the BOU Deputy Governor Michael Atingi-Ego called a ‘special’ meeting to take further action following the rise in headline inflation from 6.3% at the end of May to 6.8% at the end of June 2022.
KACITA chairperson, Thaddeus Musoke Naggenda says that the high inflation rate has incapacitated business transactions, adding that it is wrong for the Central bank to increase the CBR under such circumstances because it will do more harm than good.
According to Naggenda, all indicators show that there is very little money in circulation, adding that the current inflation is mainly caused by external factors. He explains that the increment of CBR as a strategy to contain the runaway inflation is impractical and will already cripple the already strained business sector.
According to Naggenda, they are ready to engage all stakeholders and table evidence backing their claims. “We are going to go through all measures to make this a reality because however much the intention is good, it is not the answer to the current problems and we have the evidence to prove that when we meet them,” he said.
KACITA also wants the government to transfer the management of the presidential fund meant for promoting the Buy Uganda Build Uganda campaign from the Ministry of Trade to trader’s associations like KACITA because they are in the best position to implement it since they are also traders.
They also want the government to transfer the COVID-19 stimulus package for traders from Uganda Development Bank to business-owned SACCOs because it has been hard for beneficiaries to access the package through the bank.
They have also agitated for more flexible terms and conditions from financial institutions over accumulated loan interests during the COVID lockdown.