The Bank of Uganda intends to use its monetary policy to target a core inflation rate of 5 percent over the medium term, and we are confident that this target can be delivered. This implies that, with nominal commercial bank lending rates currently averaging nearly 25 percent, borrowers are paying real lending rates which average almost 20 percent.
I find it inconceivable that average real lending rates of this magnitude are sustainable over the long term, because most private sector businesses will not generate sufficiently high real returns to enable them to service their debt.