For nearly a year now, Governor Tumusiime Mutebile has lowered the CBR rates virtually every month in a bid to allow banks access enough liquidity to enable them lend. But today, seemed to deliberately throw his always eager audience in confusion as he left the February CBR rates unchanged at 12% yet still noted that a lot of loans are going bad because of high interest rates.
To what end then? Seeing as more bad loans are declared and banks won’t reduce their prime lending rates.
Will Governor Mutebile crack the highly unlikely whip on the banks? So far, he expresses no intention of doing so. Yet, clearly, the Central Bank is counting on the Banks to reduce their prime-lending rates, lend more so as to restore the balance in the economy.
“What we have to do is increase exports, that’s the only way to stabilize the exchange rate” says the Governor. Yet to increase exports, the Shilling has to be kept artificially weak.
Its an unclear path, this one. But we don’t have much choice than to “Trust in Mutebile.”