monthly economic developments report january ... - Bank of Uganda by jianghongl


									                          [Monthly Economic Developments, January 2011]


                JANUARY, 2011

                BANK OF UGANDA


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                                                                                                               [Monthly Economic Developments, January 2011]

                                                                       TABLE OF CONTENTS
1.  Introduction ............................................................................................................................................ 3 

2. Monetary policy and the interbank domestic money market developments .................................... 3 

3. Inflation Developments and outlook ...................................................................................................... 4 

3.1 Inflation outlook....................................................................................................................................... 6 
4. Exchange rate developments ........................................................................................................................ 8 

4.1 Global factors. .......................................................................................................................................... 8 
4.2 Domestic Factors ...................................................................................................................................... 9 
5.  Developments in Monetary aggregates and Credit ........................................................................ 10 

5.1 Money supply .......................................................................................................................................... 10 
5.2 Private sector credit................................................................................................................................. 10 
6.  Interest rates ............................................................................................................................................ 11 

6.1 Yields on government papers. ................................................................................................................. 11 
6.2 The term structure of interest rate .......................................................................................................... 12 
6.2 Commercial Banks’ Lending and Deposit Rates ................................................................................... 13 
7.  External sector developments ............................................................................................................ 14 

8.  Fiscal operations................................................................................................................................... 15 

9.  Economic activity developments ............................................................................................................ 16 

10.  The Global Economy .............................................................................................................................. 18 

11.  Policy outlook ....................................................................................................................................... 19 

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   1.   Introduction
This report presents the recent developments in key macroeconomic indicators, the monetary policy
stance and actions pursued during the month of January 2011, and outlook for February 2011 and the
near term.

2. Monetary policy and the interbank domestic money market developments
Monetary policy continued to pursue the dual objectives of maintaining price stability and supporting
economic growth. The money supply targets, in hindsight of the inflation outlook, continued to reflect
the optimal GDP growth and consequently, in line with the desired optimal liquidity in the banking
system, two Treasury bills and one Treasury bond were offered during the month. A Shs. 100 billion 3-
year bond was issued on January 05, 2011 which was oversubscribed by Shs. 90.6 billion. At a weighted
average price of 95.6 per Shs. 100, the resultant yield for the 3-year 10.25 percent coupon bond was 12.1
percent, which was higher than 11.1 percent for the 3-year bond that was reopened on November 10,
2010. Two Treasury bill auctions, one with an offer of Shs. 90.0 billion and the other of Shs. 80.0 billion
were held in January 2011. The two Treasury bills auctions were oversubscribed by Shs. 98 billion and
Shs. 39 billion, respectively. However, in an effort to limit the extent of the increase in the yields, BOU
rejected some of the bids in the auction of January 27, 2011 and awarded only Shs. 18.6 billion.

The liquidity conditions were rather tight in the domestic financial system during the month. An analysis
of commercial banks’ money market lending and borrowing sheds light on the banking system’s overall
liquidity conditions. The commercial banks’ lending and borrowing activities in various money markets,
including the repurchase market, the interbank market and the foreign exchange swap market, reveals
significant liquidity squeeze in the banking system. However, since this has not resulted in sharp
increase in the deposit and lending rates, it could suggest that the banks regard this as occasional
tightness in the money markets. The tightness was largely caused by the lower than anticipated net fiscal
injection and the BOU’s interventions in the foreign exchange market. The net liquidity withdrawal
amounted to Shs. 106 billion, contrary to a projected net liquidity injection of Shs. 214 billion at the
beginning of the month. The BOU intervened in the IFEM by selling US$ 104 million in January 2011 and
also continued with the daily purchase of US$ 0.5 million in a bid to build foreign exchange reserves.
This intervention, in effect mopped Shs. 236.7 billion, which had not been projected at the beginning of
the month. To close the liquidity gap, BOU issued reverse REPOs in the domestic interbank money

The tight liquidity conditions resulted in the increase in the money market rates. The rate for the 7-day
tenor interbank rate rose on average by 220 basis points, from an average of 6.1 percent in December 2010
to 9.6 percent in January 2011. The overall all tenor rate average increased by 349 basis points from an
average of 5.08 percent to 8.57 percent in same period. The tightness is also reflected in the spike in the
reverse repo rate, which rose from 7.4 percent in last reverse repo issue of December 2010, to peak at
14.24 percent in the January 27, 2011 issue. As at January 31, 2011, the outstanding stock of reverse
REPOs stood at Shs. 361.1 billion. This notwithstanding the BOU’s intervention in the domestic money
market, the commercial banks’ demand for shilling liquidity remained sustained at high levels and
consequently the banks partly funded their shilling liquidity needs by using swaps, which by the end of
January, amounted to Shs 415.4 billion.

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The rise in the interbank rates however was not fully transmitted into the rise in the yields on
government securities. The Rediscount Rate and Bank Rate in January 2011, were 12.06, and 13.06 percent
respectively and the bank and rediscount rates being lower than the interbank rate, commercial banks
found it cheaper to source extra liquidity from the BOU standing facilities. Rediscounts of treasury
securities and borrowings of BOU funds by commercial banks during the month totalled Shs. 90.5 billion
and Shs. 122.4 billion, respectively.

Largely reflective of the tight liquidity conditions, the domestic interbank money market was also active
in January 2011 compared to the previous month. The total amount traded for tenors of not more than 30
days rose to Shs. 1,021 billion from Shs. 923.2 billion in December 2010. The 7-day transactions
dominated, accounting for 36.6 percent of the total volumes traded in January 2011. The high rates from
the reverse REPOs issued by BOU formed the benchmark for the bulk of rates in the domestic interbank
trading. Figure 1 depicts the trend in the evolution of interbank rates and shows that both the volume of
transactions and weighted average interbank rates rose in January 2011.

Figure 1: Volume of transactions and weighted average rates in the interbank market.

Source: Bank of Uganda

3. Inflation Developments and outlook
Price stability and in particular low inflation of less than 5 percent has been the BOU’s main focus since the 
early 1990s. Hence, inflation developments provide important information about the outlook for the BOU’s 
monetary policy. 
Inflation has been increasing since November 2010 on account of both domestic and external factors.
Annual headline inflation increased to 5.0 percent in January 2011 from 3.1 percent and 1.4 percent in
December 2010 and November 2010, respectively. Annual core inflation also increased to 5.6 percent in
January 2011 from 4.8 percent and 2.9 percent, respectively during the same period of time. Annual EFU
and food crops inflation increased to 8.6 percent and 1.5 percent, respectively from 3.2 percent and minus
4.6 percent, respectively in December 2010. This is the first positive annual food crops inflation registered
since the beginning of the fiscal year. Developments in annual inflation are shown in Figure 2.

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Figure 2: Annual inflation developments: July 2006-January 2011

Source: UBOS

Monthly headline inflation declined only marginally to 1.2 percent in January 2011 from 1.4 percent in
December 2010. Monthly core inflation however declined to 0.9 percent from 1.7 percent in December
2010. Notwithstanding this decline, both headline and core inflation have been consistently positive since
November 2010 as shown in Figure 2. Monthly EFU and Food crops inflation increased to 1.1 percent and
3.0 percent, respectively, in January 2011 from minus 0.2 percent and 0 percent respectively in December

There are several reasons for the rise in inflation. First, demand for goods and services by Ugandan
consumers have rebounded very robustly in recent months after a sharp decline in most of 2010, which
puts upward pressure on consumer prices.

Second, the FOOD prices have risen quite sharply since August 2010, rising on average by 2.4 percent per
month, partly because of seasonal and global factors. Since the beginning 2011, most parts of the country
have been experiencing dry spell, due to La Nina conditions and this has affected food production and
consequently food crops inflation. Indeed, food items that depend on seasonal and weather factors, such
as, matoke, sweet potatoes, oranges, sweet bananas, cabbage, tomatoes, green pepper, bbugga and
onions recorded higher prices in January 2011 mainly on account of low supplies to the market. Food
constitutes on average about 27 percent of the household expenditure in Uganda but since the dry spell is
expected to last until early March 2011 in some part of the country and up to June in others, the rise in
food crop prices is expected persist until the mid 2011.

Third, the upsurge in the global crude oil prices which averaged to above US$. 100 per barrel in January
2011, coupled with the depreciation of the exchange rate have pushed up the prices of fuels and imports.
Increased fuel prices are a factor in rising food prices. There is evidence of a strong exchange rate pass-
through to inflation and since the exchange rate depreciated by about 20.5 percent on a year-on-year
basis in January 2011, this is expected to have passed through to inflation, contributing about 1.1 percent
to the increase in the core inflation.

Fourth, Uganda is not alone in experiencing a rise in inflation. Globally, consumer prices are currently
rising in both the rich and poor countries. Countries from which Uganda imports from like China, India,
Kenya, South Africa and United Arab Emirates have been experiencing inflationary pressures. For
instance, in China producer-price inflation accelerated in January 2011 to 6.6percent from a year earlier,

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and compared with 5.9 percent in December 2010. India’s inflation has remained in double digits since
October 2010. These countries inflation ultimately feed through to Uganda’s domestic inflation in form of
imported inflation.

3.1 Inflation outlook.
Risks to inflation have considerably increased in the recent months. There are several external and
domestic factors that are likely pose upside risks to inflation in the near-term.

Weather forecasts from Meteorology Department indicate that the drought that started at the beginning
of the year may continue through February 2011. If this drought persists, as it is indeed predicted to, then
food production will be adversely affected. This will result in increase in food prices, which will feed
through to headline inflation. The exchange rate has been depreciating since July 2010. It depreciated by
20.5 percent on year-on-year in January 2011. Indeed, as already noted, there is a strong correlation
between core inflation and the exchange rate. Further depreciation could lead to higher inflation
expectations and therefore further inflation pressures.

On the international scene, inflation has rapidly hurtled to the top of the policy agenda around the globe,
but in many cases it is not clear if inflation risks will lead to monetary policy tightening by the central
banks. Inflation in Uganda’s major trading partners has been rising and continues to rise. Inflation in
Euro-zone, China, India, and Kenya, Uganda’s largest trading partners, have been on the rise and the
projections are that the rise is expected to persist given the global outlook.

Rising commodity prices are also likely to affect domestic inflation going forward. World food prices
rose to a record high in January, according to the UN's Food and Agricultural Organization (FAO). The
high price of food is thought to have been a factor in recent political unrest in Tunisia, Egypt, Algeria and
Jordan. The FAO Food Price Index, which measures the wholesale price of basic foods within a basket,
averaged 231 points in January 2011. It was up 3.4percent from December 2010, the seventh monthly rise
for the index. According to FAO, these high prices are likely to persist in the months to come. Although
as a whole, Uganda is not a food deficit country, high international food prices are likely to spill-over
into Uganda in several ways. In some cases, governments have sought to cushion the blow by extending
subsidies or announcing export controls. For example, China and Indonesia have announced measures to
curb food prices, and the Indian government has imposed controls on exports and eased restrictions on
imports, including tariff reduction where necessary, to improve domestic supplies. Some countries have
already imposed trade curbs to head off the protests that have rippled through the MENA region. For
example, Russia recently extended its export ban on grains until July 2011. These measures could amplify
price increases instead due to protectionism and associated distortions that could result.

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The rise in commodity prices is not confined to agricultural products, although the increase is most
dramatic there. Oil prices have been extremely volatile over the past two years. Benchmark Brent crude
prices started 2008 at around $90 a barrel, peaked that summer and then ended the year at $40 a barrel in
the middle of a global recession. In January 2011, Brent crude prices averaged to about US$ 76 a barrel.
The January 2011 average was about US$100, implying a percentage rice of about 36 percent. In the same
period, the shilling has lost against the US dollar, by about 20.5 percent, suggesting that effective fuel
prices should rise by about 57 percent is shillings. Increased energy prices are a factor in rising food
prices. Like food, the increase is a combination of the impact of supply problems, interest from investors
and rising demand. The outlook for oil prices is foggy and the effects of price changes equally uncertain.
But there is a strong possibility that oil prices could rise further given the unrest in the North Africa and
Middle East. Should global recovery strengthen more than is being projected, this would even amplify
the oil prices increase.

Indeed, the IMF’s oil price projections indicate that they could remain close to US$ 100 per barrel for
most of 2011 to cater for the global developments. Higher oil prices are undoubtedly a concern for the
fragile global economic recovery. It is not only the direct effects of the cost of fuel and energy, but also
feeds into the prices of other goods by raising the cost of production and transportation. While demand
growth is contributing to higher oil prices, the same demand growth can be interpreted as a positive
economic signal. A continued increase in oil prices going forward is likely to feed through to higher
domestic inflation. This could also squeeze incomes, reducing demand and also restrict supply since it
makes the returns from working and capital investment less attractive. Stagflation – the combination of
stagnation and inflation – could result if no policy actions are undertaken.

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4. Exchange rate developments 
The Uganda shilling-US dollar exchange rate has become increasingly unpredictable. For instance, the
average annual depreciation rate between January 2009 and January 2011 was 13.5 percent, but for the
financial year 2010/11, the depreciation rate has been much higher averaging about 16 percent on annual
basis. On a monthly basis, the Shilling depreciated 1.3 percent against the US dollar from an average of
Shs. 2,304 per US dollar in December 2010 to Shs. 2,333 per U.S. dollar in January 2011. On a year-on-year
basis, the shilling depreciated by 20.5 percent in January 2010.

As a mechanism to correct current account imbalance, the shilling fall against the US$ is helpful, as a
weaker shilling makes the Uganda economy more price competitive internationally. However, the heavy
exchange rate depreciation could, perversely, exacerbate inflation by increasing the prices of imports.
The rapid shilling depreciation in a short time span inherently induces macroeconomic instability and
uncertainty. This has perverse effect on international trade, makes investment decisions more difficult
because greater exchange rate volatility increases uncertainty over the return of a given investment and
therefore increases the option value for waiting before investment decisions are made. Moreover, when
volatility is concentrated in a very short timeframe, this could have much larger economic impact and
ultimately could result in lower economic growth.

Under a floating exchange rate regime, the price of one country’s currency in terms of another’s country’s
currency may change in response to developments either at home or abroad. Therefore, the exchange rate
is determined by supply and demand for currencies, but like any other asset, exchange rate is also
determined by perceptions of risk or speculation. Supply and demand, in turn, are influenced by factors
in the economy, foreign trade, and the activities of international investors.

4.1 Global factors.
The shilling depreciation pressures have partly been driven by global developments, which led to the
appreciation of the dollar against major international currencies. The global financial and economic crisis
has led to violent exchange rate fluctuations, which has impacted quite unevenly on the currencies of
major industrial countries. For instance, Uganda shilling, Euro, and the Kenyan shilling on average have
depreciated against the dollar since July 2010. On year-to-year average, the Kenya shilling depreciated by

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7 percent, the Euro by 9 percent and the Uganda shilling by 16 percent against the US dollar between July
2010 and January 2011. Similar trend is observed using month-on-month changes. The implication of this
is that, with the US$ being an international reserve currency, its movement against other international
currencies will ultimately spill-over into domestic economy.

4.2 Domestic Factors
Current-account developments. Uganda’s current account balance has substantially weakened since
2008. On quarterly average, current account balance worsened by about 38 percent between 2008/9 Q4
and 2010/11Q1, largely reflecting the impact of global financial crisis and global recession as the demand
for Uganda’s exports has weakened, portfolio flows have declined almost to zero, aid and private sector
inflows have also declined substantially. The impact of the worsening current account balance is reflected
in the depreciation of the shilling.

Exports receipts have substantially declined since January 2010 after recovering in the second half of
2009. On an annual basis, the value of exports receipts decreased on average by 8.7 percent in the first
half of 2010/11. Figure 3 shows a negative relationship between growth of formal exports and the annual
percentage change in the exchange rate.

Figure 3: Performance of formal exports and the exchange rate y-o-y growth rates

Source: Bank of Uganda

The volume purchases and sales of foreign currency by commercial banks from the non-bank public as
well transaction volumes in the interbank foreign exchange market can be used to assess the performance
of the external sector. The turnover in FX trading has generally picked-up after slackening in most of
2009. For instance, between July 2010 and January 2011, interbank purchases and sales from non-bank
public amounted to US$ 3.769 billion and US$ 3.835 billion respectively, compared to US$2.951 billion
and US$2.936 billion, respectively between July 2009 and January 2010. However, Net FX purchases by
the banks declined substantially in January 2011 resulting in a net sale of about US$ 109 million. This
positive net sale is combination of speculative buying as well as demand by importers partly contributed
to the shilling loss against the US dollar. Overall, a negative relationship between the exchange rate and
net purchases by banks is discernable in Figure 4 and the correlation coefficient of -0.26 for the period
July 2010 to January 2011 confirms this relationship. Since net sale by the banks in the same period
amounted to about US65.5 million, this contributed to the exchange rate depreciation during this period.

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Figure 4:FX net purchases by banks and exchange rate.

Source: Bank of Uganda

Private sector imports have largely been growing at a positive rate, averaging to an annual average rate
of about 4.8 percent in the first half of 2010/11. This could therefore have contributed to the exchange
rate depreciation since as already noted exports declined during this period. Related to private sector
imports, growth of foreign currency denominated loans has been growing exponentially, rising from
about US$ 447 million in December 2008 to about US$ 641 million in December 2010. The average M-o-M
growth rate in foreign currency denominated private sector loans was 5 percent in the first half of
2010/2011 and on Y-o-Y basis this was 35 percent in the same period.

 5.     Developments in Monetary aggregates and Credit

5.1 Money supply
Monetary aggregates have on average been increasing since January 2010. In December 2010 however,
the growth in the aggregates was lower than that observed in November 2010. M1 grew by 34.5 percent,
M2 and M3 by 35.9 percent and 39.3 percent, on year-on-year basis respectively. The annual growth in
money has mainly been driven by the growth in term deposits. On a monthly basis, growth in money
was attributed to growth in both term deposits and currency in circulation which grew by 1.6 percent
and 9.3 percent respectively in December 2010. Part of this growth is attributed to monetary policy easing
adopted 2010.

5.2 Private sector credit
Private sector credit has been on consistent recovery since mid last year. On year-on-year basis, private
sector credit expanded by 36.5 percent in December 2010 and 3.9 percent on monthly basis in comparison
to an annual growth of 32.9 percent and a monthly growth rate of 3.4 percent in November 2010.
Notwithstanding this increase however, it is important to note that the annual growth rates in private
sector credit is still below those realized in the second half of 2008. In July 2008, total private sector credit
increased by 58 percent, on annual basis, before declining gradually to an annual growth rate of about 16
percent in April 2010. Since then however, there has been consistent recovery, which culminated at a
growth rate of 35.0 percent in December 2010.

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The expansion in private sector credit is largely driven by the robust flow of credit to the building and
mortgage, agriculture, trade and transport and communication sectors. In December 2010, the annual
growth of credit to the building and construction sectors, and agricultural sectors was 60.7 percent and
59.0 percent respectively. The annual growth of credit to trade and transport and communications sectors
averaged about 25 percent. Personal loans however declined by 1.7 percent in December 2011. Overall, in
the first half of 2010/11, the average annual growth of credit to agricultural and building and mortgage
sectors was 52.8 percent and 47.3 percent, respectively.

The value of applications slightly declined from Shs. 1.18 trillion in November 2010 to Shs. 1.15 trillion in
December 2010. Similarly, the number of loan applications approved decreased from 34,714 in November
2010 to 22,606 in December 2010. The largest value of applications was in Building, Construction and
Real Estate constituting about 28.7 percent followed by Trade and Commerce at 20.3 percent of the total
value of applications but approval constituted about 17.7 percent and 19.2 percent respectively.
However, the value of applications approved increased from Shs. 426.6 billion in November 2010, to Shs.
442.7 billion in December 2010.

In terms of contribution to the total stock of private sector credit, personal and household loans averaged
16.7 percent of the stock of private sector credit, while building and mortgage and trade sectors
accounted for 15.0 percent and 15.3 percent, respectively as shown in Table 1. This distribution indicates
that credit is being channelled to key sectors of the economy. Although personal loans accounted for the
highest share of credit in H1-2010/11, it is important to note that personal loans are not used entirely for
consumption, a share of which could be used household investments.

Table 1: Sectoral distribution of credit to the private sector
                                       Sep    Oct     Nov        Dec     Sep     Oct     Nov     Dec
                                       2009   2009    2009       2010    2010    2010    2010    2010
Agriculture                            5.5    5.5      5.2       5.2      6.4     6.5    6.7     7.1
Mining & Quarrying                     0.4    0.2      0.3       0.2      0.9     1.0    1.0     0.3
Manufacturing                          13.3   13.2    14.0       12.8     13.3    14.1   13.9    13.4
Trade & Commerce                       19.8   20.0    20.1       21.7     23.6    22.5   22.7    22.8
Transport & Communication              5.9    7.3      5.9       7.4      7.7     7.7    7.3     8.2
Electricity and Water                  0.8    0.7      0.7       0.6      1.1     1.0    0.9     0.9
Building, Construction & Real Estate   16.5   16.6    16.7       15.7     19.5    19.2   19.5    19.5
Personal Loans                         26.2   21.2    21.5       23.4     16.5    15.7   15.6    15.3
Other Services                         11.6   15.3    15.7       12.8     11.0    12.4   12.4    12.5
Source: Bank of Uganda

 6. Interest rates 

6.1 Yields on government papers.
The yields on Government securities also increased line with the tight liquidity conditions. Yields on the
3-year 10.25 percent coupon bond increased from 11.2 percent for the 3-year bond that was issued on

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November 10, 2010 to 12.1 percent. Yields on the Treasury bills also increased, the largest increase being
on the 91-day Treasury bills, which increased by 138 basis points, from an average of 7.97 percent in
December 2010 to 9.34 percent in January 2011. Yields on 182-day and 364-day Treasury bills increased
from 9.12 percent and 10.00 percent to 9.82 percent and 10.57 percent, respectively. The increase in
Treasury bill yields may also be an indication of economic agents’ expectations on inflation and the likely
monetary policy response.

    Figure 5: Trend of Discount Rates on Treasury bills, January, 2005 – January, 2011

Source: Bank of Uganda

6.2 The term structure of interest rate
Interest rates are important for the economy in many ways, and the shape of the yield curve depends
critically on expectations of future interest rates. The slope of the yield curve (that is, the difference
between the interest rate on longer-term and shorter-term instruments) has also been suggested as a
guide to monetary policy. Whereas short-term interest rates are strongly influenced by the current setting
of the policy instrument, longer-term interest rates are influenced by expectations of future short-term
interest rates and thus by the longer-term effects of monetary policy on inflation and output. The yield
curve in Figure1 6 indicate a gently upward slopping yield curve suggesting that economic agents
generally believe that there will be no significant changes in the Ugandan economy, such as in inflation
rates, and that the economy will continue to grow at a normal rate. Further, economic agents expect
higher yields for bonds with long-term maturities that occur farther into the future. This is a normal
expectation of the market because short-term instruments generally hold less risk than long-term
instruments; the farther into the future the bond's maturity, the more time and, therefore, uncertainty the
bondholder faces before being paid back the principal. The slope of the yield curve is relatively flat
between the 3-year and 5-year tenors which may signal uncertainty of economic agents about growth
and inflation in the medium term. However, yields have consistently edged up in recent months across
all tenors, which is also an indication that economic agents could be expecting risks to rise or strong

  For example, a yield curve with a steeply positive slope (that is, longer-term interest rates far above short-term
rates) may be a signal that participants in the bond market believe that monetary policy has become too expansive
and thus, without a monetary policy correction, more inflationary. Conversely, a yield curve with a downward
slope (short-term rates above longer rates) may be an indication that policy is too restrictive, perhaps risking an
unwanted loss of output and employment.

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economic activity. In addition, the yield curve is also influenced by other factors, including prospective
fiscal policy, developments in foreign exchange markets, and expectations about the future path of
monetary policy. Thus, signals from the yield curve must be interpreted carefully.

Figure 6: Yield Curve

Source: Bank of Uganda

6.2 Commercial Banks’ Lending and Deposit Rates
Commercial banks average lending rates fell marginally by 43 basis points to 19.7 percent in December
2010. The weighted average lending rates varied across sectors with the manufacturing sector attracting
the lowest weighted rate of 13.3 percent while land purchase attracted the highest of 26.0 percent, which
reflects extent of risk. Similarly, saving and demand deposit rates fell by 4 basis points and 7 basis points
respectively, while time deposits rose by 217 basis points as shown in shown in Table 2.

Table 2: Commercial bank lending and deposit rates by sector
                        Local currrency denominated                          Foreign currency denominated
                         Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10             Jul-10 Aug-10      Sep-10 Oct-10 Nov-10       Dec-10
Lending rate             19.57    20.32   18.82   20.01      20.14   19.71     10.62     10.25     10.00    9.31     9.77      8.60
Demand deposit rates      1.28     1.25    1.36       1.34    1.35    1.28      0.96      0.96      0.96    0.96     0.96      0.96
Savings Deposit rates     2.49     2.56    2.39       2.32    2.41    2.37      1.52      1.70      1.51    1.50     1.50      2.65
Time Deposit rates        7.11     6.80    5.43       7.62    7.61    9.78      3.68      4.04      3.52    3.70     3.08      3.87
Average deposit rates     1.95     2.10    2.09       1.97    1.91    2.02      1.06      1.40      1.09    1.15     1.28      1.25
Average deposit rates     7.11     6.80    5.43       7.62    7.61    9.78      6.94      6.21      6.48    5.61     6.69      4.70
SECTOR                                                   Jul-10 Aug-10           Sept-10         Oct-10      Nov-10         Dec-10
                                                        Lending Rates
Agriculture                                              22.62    22.21                18.58       20.52     23.54          22.89
Mining and Quarrying                                     18.41    18.10                17.46       18.30     17.18          19.13
Manufacturing                                            14.14    17.60                14.21       15.72     13.45          13.28
Trade                                                    19.89    20.65                20.51       21.51     21.48          22.05
Transport and Communication.                             19.32    19.74                17.06       18.72     19.04          19.29
Electricity and Water                                    22.77    21.15                20.58       20.51     21.45          21.06
Residential Mortgage                                     17.85    19.67                21.00       20.95     21.14          21.14
Commercial Mortgage                                      25.01    23.26                18.44       19.46     19.24          18.85

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Land Purchase                                      25.50      26.68       25.62       22.87       26.41     26.00

Other (Building , Construction and real estate)    19.89      20.22       19.15       21.56       21.08     19.05
Business Services                                  24.00      21.68       23.60       24.18       23.81     19.30
Community, Social and Other Services               21.21      20.97       21.70       20.29       21.62     22.10
Personal and Household Loans [Auto (car)
loans]                                             26.71      27.59       23.90       24.34       22.87     25.50
Other personal and household loans                 21.02      21.17       21.42       20.46       21.40     21.59
Other Activities (not anywhere above)              20.70      20.70       20.13       19.92       21.11     20.49
Overall                                            19.57      20.32       18.82       20.01       20.14     19.71
Source: Bank of Uganda

In terms of the foreign currency denominated loans and deposits, the weighted average lending fell by
117 basis points to 8.6 percent in December 2010. While the saving and time deposit rates increased by
116 and 79 basis points respectively, the demand deposits rate remained stable at 1.0 percent. As a result,
the spread on commercial bank interest rates fell to 4.7 percent in December 2010 from 6.7 percent in
November 2010. Overall, in hindsight of the increase in the money market rates and yields on
government securities, there is a strong likelihood that interest rates in the banking system will likewise
rise in the near term.

 7.     External sector developments
Exports receipts increased in December 2010 by about 3.2 percent to US$ 204.75million from the export
earnings of US$ 198.31million in November 2010. The increase in exports receipts in December 2010 was
on account of higher non coffee exports. Formal exports proceeds for December 2010 were estimated at
US$ 146.39 million, which is an increase of 3.1 percent and 4.6 percent compared to the proceeds realized
in December 2009 and November 2010 respectively. Coffee exports amounted to 237,747 bags worth US$
28.69 million, representing a decrease of 10.9 percent and 10.7 percent in volume and value, respectively
over the previous month. Coffee exports, in comparison to the same month last year, registered a
decrease in volume and an increase in value of 12.8 percent and 11.4 percent respectively. The unit price
for coffee averaged US$ 2.01 per kg in December 2010, the same price registered in for November 2010.
Formal non-coffee exports proceeds increased by 1.2 percent and 9.2 percent compared to the proceeds
realized in December 2009 and November 2010 respectively.

The preliminary estimate for informal cross border trade (ICBT) export’s during December 2010 is US$
58.4 million as shown in Table 3 below. (A detailed table of the exports proceeds is provided in the

Table 3: Exports of Merchandise (US$ millions)
                                       Dec-09      Jul-10      Aug-10      Sep-10      Oct-10      Nov-10      Dec-10

Total Exports                             237.12     159.85      192.27      157.92      186.93       198.31        204.75

Coffee (Value)                             25.77      27.53       23.66       18.96       23.30        32.14         28.69
Volume ('000 60-Kg bags)                    0.27       0.27        0.22        0.17        0.19         0.27          0.24
Av. unit value                              1.57       1.72        1.81        1.86        2.07         2.01          2.01
Non-Coffee formal exports                 116.26      95.63      121.14       98.55      109.15       107.80        117.70

                                                                                                          Page 14 of 20
                                                                          [Monthly Economic Developments, January 2011]

ICBT Exports                                95.09        36.69         47.47            40.41       54.48      58.36     58.36
Source: Bank of Uganda

 The import bill for goods in December 2010 is estimated to have decreased to US$ 374.33 million from
US$ 411.35 million recorded in November 2010. This was mainly on account of the decrease in
government imports, which were recorded at US$ 38.12 million compared to US$ 91.74 million recorded
in the previous month. Private sector imports increased to US$ 336.22 million compared to US$ 319.61
million recorded in November 2010 and 320.51 million in December 2009. The main items imported were
machinery, vehicles, and equipment; petroleum products; chemicals and related products; vegetables;
base metals and mineral products. India, Kenya and China continued to be the main sources of imports.
Developments in the import bill are reflected in Table 4.

Table 4: Imports of merchandise (US$ millions)
                              Dec-09    Jul-10      Aug-10    Sep-10       Oct-10         Nov-10     Dec-10
         Total Imports         343.53    316.83      313.27      381.15        330.91      411.35     374.33
     Government Imports         23.02     26.29       11.99       85.85         15.09       91.74      38.12
            Project             18.77     10.22        8.25       10.88         12.40       12.40      17.74
          Non-Project            4.25     16.06        3.74       74.97          2.69       79.35      20.37
     Private Sector Imports    320.51    290.54      301.28      295.29        315.82      319.61     336.22
          Oil imports           40.98     43.87       44.81       43.74         49.00       49.16      54.58
        Non-oil imports        279.53    246.68      256.47      251.56        266.82      270.45     281.64
Source: Bank of Uganda

Official aid inflows in January 2011 amounted to equivalent of about US$ 9.12 million. Budget support
was about US$ 1.12 million, project inflows about US$ 7.97 million and non-project transfers US$ 0.03
million. As at end-January 2011, the total Budget and Project Aid receipts (excl. NPT) for the FY2010/11
amounted to equivalent US$495.92million which is decrease of about 6.73percent compared to the
corresponding period in FY2009/10. Preliminary estimates indicate that the level of gross foreign
reserves stood at US$ 2.766 billion as at the end of January 2011, equivalent to 5.1 months of future
imports of goods and services.

8.        Fiscal operations
Since the beginning of 2010/11, with the exception of August and November 2010, net government
injections have underperformed relative to projected levels, which at times have resulted in tight
liquidity conditions in the money market. Net fiscal injections in January 2011 amounted to a net
withdrawal of Shs. 106 on account of government expenditure of Shs. 400 billion and tax remittances of
Shs. 506 billion as shown in Table 5. For the fiscal year 2010/11, so far, fiscal injections have amounted to
Shs. 3298 billion while tax withdrawals amounted to Shs. 2713 billion. Foreign aid less debt relief
amounted to about Shs. 1077 billion. Net securities issuance was about Shs. 600 billion, implying that net
liquidity could have contracted.

                                                                                                                  Page 15 of 20
                                                                            [Monthly Economic Developments, January 2011]

Table 5: Fiscal Operations (Shs. Billion)
                     Nov 2009        Dec 2009           Jan 2010          Nov 2010        Dec 2010         Jan 2011

   Expenditure           466           393                242               791              488              400

  Tax Revenue            271           445                343               347              428              506

  Net Injection          195           -51                -102              444               59              -106
Source: Bank of Uganda

Uganda Securities Exchange
Trading at the Uganda Securities Exchange (USE) decreased in January 2011, compared to December
2011. Total turnover fell to a tenth of the previous level from Shs. 13.508 billion in December 2010 to Shs.
1.441 billion in January 2011. The number of shares that exchanged hands also fell to a twelfth of the
previous level. Market capitalization on the other hand rose by 75.7 percent in January 2011 compared to
a 35.2 percent decline in December 2010. The all share index also increased by 2.1 percent during the
same period.

Stanbic Bank Uganda Ltd (SBU) accounted for 57.2 percent of the total turnover, followed by the Uganda
Clays (UCL) with 22.0 percent and National Insurance Company (NIC) with 15.0 percent. DFCU, Bank of
Baroda (BOBU), New Vision Limited (NVL) and Equity Bank Limited (EBL) accounted for the remaining
5.8 percent. The details of developments in the equities market in the months of October 2010 to January
2011 are shown in Table 10.

Table 7: Trading at Uganda Securities Exchange, Oct 2010 – January 2011

                                              Jan '10          Oct '10         Nov '10           Dec '10          Jan '11
  Total Turnover                       2,794,495,985     1,749,346,495    2,443,381,775   13,508,153,060   1,441,407,025

  No. Of shares Traded                    11,570,269       10,735,489       13,664,921       53,940,802        6,875,421

  Market Cap (Billion Shs. E.O.P)              7,859             12,844           2,679            4,126          16,996
  All Share Index                             806.94              1,195           1,199            1,188           1,213
Source: Uganda Securities Exchange

 9. Economic activity developments 
In a small open economy, the demand for money is a function of the level of income, interest rate,
inflation and the exchange rate. Theoretically, an increase in the level of income should induce economic
agents to demand for more real money balances to facilitate the increased volume of transactions in the
economy. An increase in the level of interest rates, on the other hand, should make non-monetary assets
more attractive, thus leading to a decline in the demand for money. Inflation has a negative impact on the
demand for money. Since the real value of money falls with inflation, while the value of other assets is
maintained, there is a strong incentive for economic agents to switch out of money into real assets when
there are inflation expectations. Likewise, a depreciation of the domestic currency should induce
economic agents to increase (reduce) their holdings of foreign currency (domestic currency), since
expected returns from holding foreign currency (domestic currency) increase (decrease).

                                                                                                                     Page 16 of 20
                                                              [Monthly Economic Developments, January 2011]

Over the last couple of months, the shilling has depreciated considerably; interest rates have been rising;
and inflation, though still relatively low, has been rising and in January 2011 rose above the BOU target
of 5 percent. These factors indicate that the demand for money should be falling. However, the growth of
monetary aggregates has been rising consistently. The only factor that can explain the consistent increase
in monetary aggregates is robust growth in income or aggregate demand. Private sector credit also
continues to be buoyant and this buoyancy is likely to boost economic activity, given that credit plays an
important role in the investment process. It is however important to note that the foreign currency
denominated loans have grown substantially. The average M-o-M growth rate in foreign currency
denominated private sector loans was 5 percent in the first half of 2010/2011 and on Y-o-Y basis, this was
35 percent in the same period. Another noteworthy issue is that share of personal loans has drastically
declined; from 21.2 percent in July 2010, to 15.3 percent in December 2010. This has been substituted for
by credit to trade and Building, Mortgage, Construction and Real Estate sectors.

On the fiscal side however, government expenditure on domestic goods and services has continued to
underperform compared to the programmed levels. In January 2011, it underperformed by 36 percent.
This underperformance of government liquidity injections has a depressing on aggregate demand in the
economy. The other fiscal measure that can be used to gauge the buoyancy of economic activity is taxes
related to domestic economic activity. This includes both direct and indirect taxes. For the period July
2010-January 2011, total direct taxes increased by 30 percent, largely on account of corporate taxes and
PAYE, which increased by 21.1 percent and 28.3 percent, respectively, compared to July 2009-January
2010 period. This increase is partly indicative of growing economic activities. During the same period,
indirect domestic taxes increased 8.42 percent. VAT increased by 6.6 percent and excise duty by 12.9
percent in the same period. The increase in VAT reflects buoyancy in consumption, while increase in
excise taxes is indicative of increased domestic production.

On the external side, formal private sector imports have continued trending upward since October 2010.
For analytical purposes, private sector imports are disaggregated into two categories, that is, those used
for production and those used for final consumption. For this purpose, we categorize mineral products,
chemical & related products, plastics, rubber, & related products, wood & wood products, base metals &
their products, machinery and equipment, heavy duty vehicles & accessories as capital goods. This
categorization allows us to assess the extent to which increase in imports contributes to the enhancement
of the production base in the economy. As shown in Figure 7, the production components surpass the
consumption component. This shows that the growth in imports is important from the production point
of view.

                                                                                               Page 17 of 20
                                                              [Monthly Economic Developments, January 2011]

Figure 7: Consumption and Production Components of Private Sector Imports: July 2008 – December 2010

On the export, total export earnings have continued to increase since October 2010, having
declined by in September from the levels realized in August 2010. Both formal and informal
exports grew in December 2010. Overall, the analysis of macroeconomic indicators shows that
economic activity has rebounded strongly and this is attributable to growth of both consumer
expenditures and investment. However, the projection is that growth remains below potential. In
addition, the widening current account imbalance seems to suggest that growth seem to be powered by
domestic demand as opposed to exports.

10. The Global Economy 
Globally, the recovery in the advanced economies appears to be consolidating and expectations of
growth during 2011, particularly in the US, are generally being revised upwards. In particular, the global
economic activity has proven to be quite resilient, notwithstanding recurring sovereign debt crises in
Europe, the chronic housing-related and debt problems facing American households, and the potential
destabilizing impact on the global economy and commodity markets from the reining in of credit
conditions in the higher-growth and more inflation-prone emerging economies. Other important
developments, such as geopolitical and weather related problems, might have temporarily dampened
growth prospects, but have not derailed the global recovery. From an overall perspective, policy remains
quite accommodative, and along with improved business confidence and spending around the world, is
supportive of global growth.

The sustainability of global growth is being reinforced by the continuing gains in manufacturing activity,
improving credit conditions, and expanding international trade. While uncertainty persists in the Euro
area and Japan, in the USA, another round of fiscal stimulus has pumped up U.S. consumer spending,
reinforcing the cyclical dynamics of increasing business activity, including expanded production,
investment, and profitability. In the emerging nations, growth has remained strong despite the
commodity price increases and the worry in these countries has been overheating. While major emerging
economies — China, India, and Brazil for example — are gradually tightening policy conditions, there is
a considerable backlog of production, construction, and development activity that is reinforcing
consistently strong growth performances.

                                                                                               Page 18 of 20
                                                              [Monthly Economic Developments, January 2011]

However, debt problems, commodity price increases and inflationary tendencies that have clearly
become visible could keep global growth limited outside Asia. In advanced economies, the earlier fears
of deflation have given way to early signs of inflation. In the emerging economies, inflation has
accentuated significantly in the recent period. The inflationary pressures in these economies which were
already strong have intensified due to sharp increases in food, energy and commodity prices.

Uganda’s economy is open and therefore highly integrated in the global economy. Despite the positive
global outlook, the pace of economic growth during the recovery has been relatively slow and major
economic weaknesses persist. Moreover, the global economy is increasing becoming unusually volatile
and uncertain. Any disruption in the global economy will always have knock-on effects on Uganda’s
economy. Looking forward, Uganda still faces downside risks, mainly associated with global volatility
and uncertainty. The fragile outlook for advanced economies, especially the Euro zone, means they are
less likely to provide the strong external demand for Uganda’s exports, remittances, FDI and foreign aid
in the foreseeable future. Going forward, Uganda’s policy challenge will be harnessing global integration
while at the same time cushioning the economy from global volatility. Uganda must taken steps to
design and implement strategies to mitigate the effects of global uncertainty. In particular, both private
and public savings must rise to strengthen the ability to respond and try to weather these continuous
shocks. Macroeconomic stability should remain core but alternative sources of growth must be sought to
provide a platform for a stronger and more resilient economic growth into the future.

11.    Policy outlook

The Ugandan economy has reverted to its pre-crisis growth trajectory, with a strong growth in the first
half of 2010-11. The robustness of growth is also reflected in corporate sales, tax revenues and bank
credit. However, the inflation outlook indicates that there are serious upward risks to inflation in the
near-term, especially if the exchange rate depreciation regains the momentum. Indeed, core inflation
exceeded the BOU target of 5.0 percent by 0.6 percent in January 2011. As earlier noted, the sources of
inflation are exogenous and there is little monetary policy can do to control these exogenous factors apart
from making sure that monetary policy does not add to inflationary pressures and taking measures to
anchor inflation expectations. Given the upside risks to inflation, BOU will pursue a tight monetary
policy stance in an attempt to rein in price growth. The shilling depreciation should be one of the key
areas of focus of the monetary policy as BOU seeks to steer the economy out of the current phase of high
inflation risks. BOU will therefore try and anchor inflation expectations by intervening in the foreign
exchange market whenever possible, especially when the source of the depreciation is speculative
behaviour. However, in adopting tight monetary policy stance, the BOU will ensure gradual tightening
which will not derailed economic growth.

The ongoing volatility in the global economy, as well as in financial and currency markets, will continue
to spill-over in the domestic economy. Intensified official intervention in most countries, improving
global economic recovery, commodity market strength, carry-trade dynamics, uneven interest rate
normalization, global currency diversification, and the persistent quest for high yield are likely to
eventually drive capital flows back into Uganda and this coupled with expected investments in the oil
sector are likely to strengthen the shilling in the near future. However, downside risks to global recovery
remain. Global economic growth is beset by tensions and strains, which could even sow the seeds of the
next crisis. Widening imbalances across countries are creating pressures that threatened to derail the
tentative recovery. There is a danger that as tensions between countries increases, we could see rising

                                                                                               Page 19 of 20
                                                                                                                                             [Monthly Economic Developments, January 2011]

protectionism – of trade and of finance. In consequence, these developments will continue having a
ripple effect down to Uganda and as such the shilling/$ will continue to sway as it adjusts to the global
developments. Therefore, the exchange rate policy will remain focused on managing volatility with no
fixed rate target while allowing the underlying demand and supply conditions to determine exchange
rate movements.

UGANDA: CURRENT ECONOMIC AND FINANCIAL INDICATORS (in billions of U Shs: end of month unless otherwise indicated)

                                                                 Dec-09      Jan-10       Feb-10      Mar-10      Apr-10      May-10       Jun-10       Jul-10      Aug-10      Sep-10      Oct-10       Nov-10        Dec-10      Jan-11

Foreign Exchange Market
        Inter-Bank Purchases (US$M)                                 659.7       578.2        696.6       741.8       669.7      798.7        894.6       729.9        804.4      640.9        655.5         731.1        828.3      853.5
        Inter-Bank Sales (US$M)                                     629.3       577.7        578.2      778.0       630.0        813.4       899.5       701.4         827.3     633.3        636.9        762.1        792.3       962.9
        Cross currency trading (US$ million)                        394.2        267.1       219.4      129.2        271.9       277.1       152.5       426.7         174.4      165.3       180.0        149.2          105.1     292.4
        Inter-Bank Mid-Rate (UShs/US$)                            1,896.6     1,935.6      1,996.5    2,086.4     2,083.0      2,174.6     2,257.4     2,257.3      2,230.9     2,251.3     2,264.8      2,288.9      2,303.9     2,332.5
Balance of Payments (US$ millions)
Exports                                                            134.3       124.0        129.7        141.8      125.8        176.0       170.1        159.9       192.3       157.9       186.9         198.3       204.8
Imports                                                            343.5       303.3        328.3       376.8       320.1       435.0        351.2        317.6        311.7      382.7      330.9           411.4      374.3
Foreign Exchange Reserves
Gross Foreign Reserves in months of imports of goods and S     5.7               5.4          5.3         5.2         5.3         4.9          4.9          4.9         4.9         4.7          5.1         5.2          5.2
Bank of Uganda Foreign Exchange Reserves (US$ M)           2,769.3           2,747.9      2,732.5      2,681.4    2,751.0     2,560.5      2,498.2       2,571.1    2,693.8     2,668.9     2,764.2      2,807.9       2,831.8

Tax Revenue                                                        444.6       343.9        299.6       309.8       328.9       297.9        364.4       426.8        352.8      320.2         331.9       347.3        428.0      506.0

Monetary and Credit Aggregates (2)
        Broad Money supply M3                                     6,797.7    6,732.5       7,104.2    7,268.6     7,610.2      7,966.1      8,293.1      8,011.6     8,467.3     8,641.0     8,831.5     9,340.2       9,392.7
        Foreign Exchange Accounts Deposits                         1,412.6      1,437.1    1,482.6    1,495.4     1,757.0      1,824.3       1,881.4    1,845.6      1,976.0    2,027.4      2,086.1       2,156.3     2,144.3
        Money supply M2                                           5,385.1    5,295.4       5,621.6    5,773.2     5,853.2       6,141.8      6,411.7    6,166.0      6,491.4     6,613.6    6,745.4        7,183.9     7,248.4
          Certificate of Deposit                                      0.0          0.0         0.0        0.0         0.0          0.0          0.0         0.0          0.0        0.0          0.0          0.0          0.0
          Currency in circulation                                 1,329.7     1,299.8      1,284.7     1,304.1    1,336.3      1,344.7     1,443.2      1,459.7      1,472.9    1,460.9       1,531.5     1,623.0       1,774.6
          Demand deposits                                         1,978.2     1,908.2     2,095.5     2,057.1     2,037.7     2,267.7      2,345.7       2,115.9    2,368.0     2,388.2      2,418.0       2,734.1     2,602.1
          Time and saving deposits                                2,077.1    2,087.4       2,241.4      2,412.1   2,479.2     2,529.5      2,622.8     2,590.5      2,650.5     2,764.5     2,795.9       2,826.7       2,871.7
        Private Sector Credit                                    3,994.0     4,033.5       4,156.9    4,231.6     4,274.5     4,433.5       4,510.1     4,624.1     4,697.4      4,817.4    5,084.5      5,244.5        5,451.8

Weighted Average Interest Rates on Shilling Transactions.
         Savings Deposit Rate                                       2.3%         2.2%        2.3%         2.3%       2.4%        2.4%         2.4%         2.5%        2.6%         2.4%      2.3%           2.4%          2.4%
         Time Deposit Rate                                          9.2%         9.3%        8.3%         7.7%        7.8%       7.5%         7.3%          7.1%       6.8%         5.4%       7.6%          7.6%          9.8%
         Lending Rate                                              20.0%        19.6%       20.2%         21.1%     22.0%       20.6%        20.1%        19.6%       20.3%        18.8%     20.0%          20.1%         19.7%
         Treasury Bills
           91 Days (End period Weighted Discount Rate)               5.3%        4.6%        3.8%         3.9%        4.1%         4.1%       4.3%         4.2%        4.8%         5.1%        5.7%         6.5%          8.1%        9.1%
           182 Days (End period Weighted Discount Rate)              7.2%        5.7%        4.6%         4.5%       5.5%         5.5%        5.3%         4.8%        5.2%        5.6%          7.1%        7.9%         8.7%        9.4%
           364 Days (End period Weighted Discount Rate)              8.3%        6.8%        5.7%         5.9%       7.3%         7.5%        6.2%         5.4%        5.9%        6.3%         7.3%         8.9%         9.2%        9.8%

Average Interest Rates on Foreign Exchange Transactions.
         Demand Deposit Rate                                         1.0%        1.0%         1.0%        1.0%        1.0%         1.0%        1.0%        1.0%         1.0%        1.0%        1.0%         1.0%         1.0%
         Savings Deposit Rate                                         1.5%        1.5%        1.6%         1.7%       1.6%         1.5%         1.7%        1.5%         1.7%       1.5%         1.5%         1.5%        2.7%
         Time Deposit Rate                                            5.1%       3.5%        4.4%         3.2%       3.9%           1.8%       3.2%        3.7%        4.0%        3.5%         3.7%          3.1%        3.9%
         Average Lending Rate                                       10.1%        11.4%       11.2%        9.9%      10.0%         9.0%        10.8%       10.6%       10.2%       10.0%         9.3%         9.8%         8.6%
Overall Interbank Rate                                               3.5%        3.7%        3.6%         3.4%       3.3%         2.7%         2.7%        2.8%        3.0%        3.0%         3.9%         4.8%         5.4%        9.3%
Treasury Bond Secondary Market rates
2-year Bond
Bid                                                                  11.4%       11.4%       9.6%         7.3%       7.0%         6.4%         7.7%        6.4%        6.0%        7.2%         8.4%         9.1%         9.8%         11.1%
Offer                                                                11.3%       11.2%       9.4%         7.2%       6.8%         6.2%         7.5%        6.2%        5.8%        7.0%         8.2%         8.9%         9.7%        9.9%
5-year Bond
Bid                                                                 12.6%       12.6%        11.4%        9.6%        8.5%         8.1%       8.2%          8.1%       8.3%        9.3%         9.5%        10.5%         11.6%       11.8%
offer                                                               12.4%       12.4%        11.3%        9.5%        8.3%        8.0%        8.0%         8.0%         8.1%       9.1%         9.3%        10.3%         11.5%       11.7%
10-year Bond
bid                                                                 14.3%       14.5%        13.5%       13.0%      13.0%         12.1%       12.8%        12.1%       11.4%       11.5%       12.0%        12.4%        12.5%       12.6%
offer                                                                14.1%      14.3%        13.3%        12.8%      12.8%        11.9%       12.6%        11.9%        11.1%      11.3%        11.8%       12.2%        12.3%       12.4%
Bank of Uganda Rates (End Month)
          Rediscount Rate                                            8.7%         8.1%       7.4%         6.8%        7.1%        7.2%         7.4%        7.3%        7.6%         8.1%        8.6%         9.2%         11.0%       12.1%
          Bank Rate                                                  9.7%         9.1%       8.4%         7.8%        8.1%        8.2%         8.4%        8.3%        8.6%         9.1%        9.6%        10.2%        12.0%        13.1%
Consumer Price Index (Base 2005/06)
           Composite CPI, Annual percentage change.                  10.9          8.9          8.1         7.5        6.0          4.3          4.2         3.3          1.7        0.3          0.2          1.4          3.1        5.0
           Core CPI, Annual percentage change                         8.0          6.4         6.9          6.7         5.7         4.6          4.5         4.6         4.0          4.1         2.5          2.9          4.8        5.6
           Food crops CPI, Annual percentage change                  36.9        30.0         21.5         17.2       10.0          3.9          3.5        -2.5        -9.2        -17.6        -11.4        -5.5         -4.7         1.5
           Elec, Fuel & Utilities (EFU) CPI, Annual percentage        -1.5        -6.5        -4.2         -1.4        3.3           4.1         3.9          1.3         1.8         2.1         3.9          3.3          3.2        8.6
Producer Price Index for Manufacturing Sector
PPI-M Composite                                                     170.2       169.9        172.6        176.8      178.2       179.4        181.3       182.5        185.9       191.4       194.7       198.0         201.3
PPI-M Local                                                          158.7      159.7        160.1       162.6      165.9        166.5       167.0        166.2        168.6       175.7      179.0         180.1        182.6
PPI-M Export                                                       208.9        210.2       220.7       230.8      223.0        226.3        237.4        245.1       249.3       249.8       252.9        267.8         274.1
Monthly Average Pump Prices of Petroleum Products
           Motor Spirit Premium (PMS)                            2,340.8     2,349.0       2,389.7    2,523.0     2,953.0      2,889.0     2,870.0     2,860.0      2,928.0     2,986.0     3,255.0      3,056.9       2,985.5     3,110.0
           Diesel (AGO)                                          2,028.4     2,024.9      2,032.3      2,159.7     2,271.0    2,290.0      2,334.0     2,346.0      2,343.0     2,366.0     2,486.0      2,480.7       2,474.7    2,530.0
           Kerosene (BIK)                                        1,704.6       1,711.0     1,750.8      1,819.3    1,879.0      1,919.0     1,956.0    1,960.0      1,980.0     2,001.0     2,071.0      2,083.6        2,123.8    2,186.0

Source: Research Department, Bank of Uganda

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