Uganda has raised its benchmark lending rate from 12 per cent to 13 per cent in a bid to stem high inflationary pressures and expected shilling volatility.

This decision comes barely two months after the country increased the Central Bank Rate (CBR) by 100 basis points to 12 per cent.

Professor Emmanuel Tumusiime-Mutebile, the Bank of Uganda (BoU) governor, said that the move to increase the CBR will ensure that medium term inflation converges towards the BOU’s policy target of 5 per cent during the course of the next financial year that begins in July.

“Forecasts showed volatilities and a high likelihood of increases in core inflation in the medium term. We hope that this raise will help strengthen the shilling against the dollar,” Prof Mutebile said.

Inflation figures for May show an increase to 4.9 per cent, up from 3.6 per cent in April. By the end of May, the Ugandan shilling had shed 6.94 per cent against dollar.

Chris Mukiza, the Director of Macroeconomic at the Uganda Bureau of Statistics linked the rise in inflation to the depreciation of the Uganda shilling against US dollar.

“The rise in the inflation rates is as a result of the Ugandan shilling’s depreciation against US dollar. We expect this to continue through to the second half of the year,” Dr Mukiza said.