Most shops in Uganda’s capital, Kampala, were closed today as traders began a three-day strike to protest an increase in commercial-bank interest rates, while the government said it was discussing ways to end the dispute.
Business owners are protesting a rise in interest rates on existing loans by commercial banks after the central bank raised its benchmark interest rate, according to the Kampala City Traders Association. Traders have also been asked to withdraw their deposits from banks, Mubarak Ntale, the 45,000-member association’s deputy spokesman, said in a phone interview.
The Ugandan Cabinet is currently meeting and will issue a statement later today on the strike, Information Minister Mary Karooro Okurut said in a mobile-phone text message.
Uganda’s central bank in November raised interest rates by 3 percentage points to a record 23 percent to curb inflation that accelerated to an 18-year high in 2011. Interest rates on commercial-bank loans have jumped to as high as 35 percent from a range of 17 percent to 23 percent in November, after the increase, according to the traders association.
The strike will continue for the planned three days if “nothing tangible” is offered by the government, Ntale said.
Rates on Hold
Ugandan lenders have no plans to reduce interest rates on loans until official rates decline, Lamin Kemba Manjang, chairman of the Uganda Bankers Association, said in a phone interview today.
“We are willing to sit down with borrowers on a case by case basis,” he said. “If necessary we can restructure the loan repayment installation and the period can be extended. Interest rates will be lowered when the benchmark rates like the CBR comes down.”
The Bank of Uganda expects official interest rates to drop when inflation eases, Deputy Governor Louis Kasekende said in a separate interview today. Annual consumer inflation slowed to 27 percent in December from 29 percent in November, according to data from the country’s statistics agency. The central bank’s monetary policy committee is scheduled to meet again next month.