KAMPALA: Uganda's central bank held its benchmark lending rate at 11 percent on Friday, citing upward pressure on inflation from growing consumer demand and a weaker currency.
The Ugandan shilling has lost 10 percent against the dollar this year after demand for imports rose, in line with the broader weakening of currencies across emerging markets.
"There may be further exchange rate depreciation pressures and food prices may rise by more than expected if harvests are poor next year," Governor Emmanuel Tumusiime-Mutebile told a news conference.
Tumusiime-Mutebile reaffirmed an economic growth forecast of 5.5 percent in the fiscal year ending in June 2015, up from 4.5 percent in the 2013/14 fiscal year.
"Growth will be supported by higher public and private investment and a recovery of domestic demand," he said.
Uganda is due to hold a national election in early 2016 and there are fears that increased public spending before the poll may also stoke inflation.
"We believe spending will rise in the run up to Uganda's 2016 election, suggesting that the next move in the CBR (central bank rate) is more likely to be a hike than an easing," said Razia Khan, head of research for Africa at Standard Chartered in London.
Election-related spending helped drive inflation to 30.5 percent in October 2011, its highest level since 1993.
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