Kampala — Uganda's economy, witnessed a hard 2012 as the banks had high lending rates, with inflation at its peak.

However, despite the reductions in the lending rates and inflation, the rate of private sector borrowing did not grow as a result of the commercial banks staying their prime lending rates.

Commercial banks are still adamant to reduce their lending rates despite a 10% point reduction in the Central Bank Rate (CBR).

The commercial banks argue that they are maintaining high lending rates because they have to dispose off loans acquired at high interest rates.

The increase in lending rates by commercial banks, coupled with the government's tightening of its expenditure has severely hit a number of sectors including the real estate sector.

A number of real estate developers as well as people who had obtained loans to purchase land and property hoping to reap from the property boom are still counting on losses. Many of them have had their property seized by banks.

Inflation

Some sections of the public felt that the reduction in inflation was not reflected in the actual prices of commodities in the market.

Ms. Maria Kiwanuka, the Minister of Finance Planning and Economic Development told a gathering at a Uganda Manufacturers' Association (UMA) luncheon last year that inflation showed that prices in 2012 were not as volatile as those in 2011.

The Monetary Policy stance exercised by Bank of Uganda to curb the runaway inflation and also bring down the high interest rates that had caused a lot of disenchantment in the private sector was largely successful as it managed to bring down inflation to single digits by the close of the year.

The lending rates also reduced and according to the Central Bank, by the end of the 2012, private sector lending was deemed to be growing.

During the reading of Uganda's 2012-2013 budget in June, Finance Minister, Maria Kiwanuka said that Growth in the services sector had slowed to 3.1%, with trade, finance, education and health services sectors registering negative annual growth rates.