Uganda has raised its benchmark lending rate from 16 per cent to 17 per cent in a bid to stem high inflationary pressures and expected shilling volatility.

This decision comes barely six months after the country increased the central bank rate (CBR) by 150 basis points to 14.5 per cent from 12 per cent in April and a further 150 basis points to 16 per cent in July.

Professor Emmanuel Tumusiime-Mutebile, the Bank of Uganda (BoU) governor, said that the bank's decision to increase the CBR by 5 per cent since April has dampened inflationary pressures.

“We have increased the CBR to ensure that in the medium term the inflation merges towards BoU policy target of 5 per cent,” Mr Mutebile said.

Uganda has seen a rise in its inflation 7.2 per cent in September up from 6.8 per cent in August. The inflation has been rising in the last several months with the July inflation recorded at 5.4 per cent up from 4.9 per cent the previous month.

The country’s inflation has been as a result of rising food prices and a combination of effects of exchange rate depreciations. The country’s shilling has also fared badly against the dollar, shedding close to 31.18 per cent according to Bloomberg currency index.

The Ugandan shilling is currently trading at 3635 due to high demand by corporates and banks paying off for client’s imports and also the fear of election spending by the government.