THE Monetary Policy Committee (MPC) has observed slow uptake of loans by the private sector in 2020/21 which is partly attributable to negative effects of Covid-19 on businesses.
This was unveiled at the MPC in its 215th Ordinary Meeting on Friday last week to discuss recent conduct of monetary policy, economic performance and outlook thereof.
“The MPC noted that improving global economy, executing additional measures by the BoT intended to create conditions for reducing interest rates on loans and promoting credit intermediation as well as ongoing measures to improve business environment are expected to provide impetus to increase loans to the private sector,” stated the statement.
The MPC was satisfied with the conduct of monetary policy in May and June this year, which succeeded to sustain adequate liquidity in banks and stabilize money market interest rates at low levels.
This creates favourable condition for increase in bank lending to the private sector and reduces interest rate on loans.
As regards domestic economy, the MPC observed that the improving global economic environment will provide great impetus to recovery of economic activities, particularly those directly linked with the global economy.
The MPC underscored the need to continue diversifying export markets and improve value addition.
Against this backdrop, the MPC maintained the decision of expanding money supply in July and August this year.
The inflation remained low, within the target range of 3-5 per cent, and risk to inflation outlook is moderate, notwithstanding recent rise of global oil prices.
Foreign exchange reserves were adequate and consistent with country and EAC benchmarks, hence contributing to stability of exchange rate.
For example, the BoT Monthly economic review for June this year shows that the level of foreign reserves remained adequate to support the external sector.
The amount of gross official reserves was 5,154.4 million US dollars which was sufficient to cover about 6.1 months of projected imports.