IMF sees Uganda private sector credit up in 09/10

By Jack Kimball

KAMPALA (Reuters) - Credit to Uganda's private sector is expected to grow by 26 percent in 2009/10 and such monetary expansion in the east African country is desirable, the International Monetary Fund (IMF) said on Friday.

Analysts say access to credit has been constrained by high interest rates and better yields on government securities. Average lending rates hovered around 18-19 percent in 2006 and 2007, but went as high as 23.3 percent last year, officials say.

The east Africa nation has revised down growth estimates to 6 percent in 2009/10 from 7 percent in the previous year, but Uganda has averaged 7.9 percent over the five years before.

Real estate, personal and household loans and related activities have the highest share of commercial bank lending, according to finance ministry data.

"Credit to the private sector is projected to grow by around 26 percent in 09/10. The level of credit penetration in Uganda is low albeit getting better in recent years," said Abebe Selassie, the IMF representative in Uganda.

"In essence, the government's program envisages the recent high levels of credit growth to be sustained in 2009/10," he told Reuters in an email interview.

The projections are based on broad money expansion, economic growth, inflation and increased monetisation expectations.

EXPANSION NOT INFLATIONARY