Stanbic Bank and Bank of Africa have issued notices of increases in their Prime Lending Rates, the lowest interest rates reserved for the best customers following closely on the heels of an increase in the benchmark Central Bank Rate.
Uganda finds itself between a wall and hard place as the benchmark Central Bank Rate (CBR) has been increased to curb rising inflation on the one hand, amidst economic contraction which would otherwise have required cheaper loans.
Earlier this week, Bank of Uganda increased the CBR by 50 basis points for August 2022 to 9% sending a signal to commercial banks to make loans more expensive. This is aimed at curbing money in circulation to bring down inflation.
This is after annual headline inflation and core inflation, which the Central Bank watches closely, rose to 7.9% and 6.3% in July 2022 from 6.8% and 5.5% in June 2022 respectively.
In response, Stanbic Bank issued a notice of an increase in its Prime Lending Rate, at which it lends to its best customers, to 18.5% up from 17% effective Friday this very same week.
Similarly, Bank of Africa has also issued a notice in the Newspapers, setting its shilling and dollar lending rates at 20% and 11% respectively. “We have also made changes to our products and services tariff,” Bank of Africa said, adding that the changes take effect on Thursday.
Standard Chartered Bank notified its loan clients of impending changes to its Prime Lending Rates starting September 1st 2022.
Uganda’s economy contracted by 1.6% for the quarter ended March 2022. Another contraction for the quarter ended June 2022 will result in a recession.