Central Bank maintains key repo rate at 6.5 percent

Central bank has announced on Monday it is maintain its key repo rate at 6.5 percent for the second quarter of 2016 sighting a positive performance outlook for the financial sector.
The bank says that the sector remains sound, liquid and resilient to external shocks and has continued to during the first quarter of 2016.
Accordingly, the capital Adequacy ratio of banks and microfinance institutions stood at 31.1 percent and 22.5 percent respectively between 2014 and 2015 above bench mark of 15 percent.

“We will nevertheless continue to monitor upcoming economic developments and take appropriate action,” said John Rwangombwa, Governor Central Bank on Monday.

Experts say that the move expected to allow banks to increasing lending to the private sector is likely to boost  the sector’s expansion thus drive the economy to private sector led.

Accordingly, outstanding credit to the private sector grew by 23.7 percent in the month of February compared 19.2 percent in the same period in 2015 and it had grown by 26.7 percent by the end of December 2015 compared to 19.6 in the same period 2014.

This development, the Governor who also chairs the Monetary Policy Committee of the Central Bank says contributed to an economic growth of 6.9 percent in 2015.

Further, the Central bank noted that  the  profitability of both Bank and microfinance sectors continued to grow with banks’ Return on Assets  growing to 2.1percent in December 2015 from 1.9 percent in December 2014 while return  on Equity stood at 11.2 percent  from 10.5 percent.

Whilst Microfinance sector recorded a growth of 3.3 percent from 3.1 percent in its return on Assets while  its Return of Equity grew to 10.5 percent in December 2015 from 9.5 percent in the same period in 2014.