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Commercial banks in Uganda have agreed to heed to a call by the country’s central bank to lower lending interest rates in a move to avail cheap credit to households and businesses to stem effects of the economic stress caused by the COVID-19 pandemic.

Mathias Katamba, chairman of the Uganda Bankers Association (UBA), an umbrella organization bringing together commercial banks, said in a statement issued here that the lowering will take effect within the next 30 days.

The chief executives of the banks in their monthly meeting on Friday did not indicate by how much percentage they would reduce since it is going to be based on the individual bank’s ability.

Bank of Uganda, the central bank recently warned the commercial banks that it would cap the interest rates if they do not reduce their interest rate in tandem to the prevailing Central Bank Rate (CBR) of 7 percent.

The bank said that some commercial banks were charging interest rates as high as 18.8 percent. The central bank said the intention of lowering the CBR is to help provide liquidity which is critical as the country fights off a decline in economic activity as a result of the COVID-19 pandemic and restriction measures to control the spread of the disease.

World Bank in its report issued on Thursday said that Uganda’s economy is projected to grow between 0.4 percent and 1.7 percent this year, much lower than the 5.6 percent in 2019.

“Financial Institutions are the main arteries through which monetary policy is transmitted and in challenging times like these, the membership of UBA wish to convey their unwavering commitment to do whatever is possible within their means and circumstances to support initiatives by Bank of Uganda to stimulate economic activity,” Katamba said.

The UBA statement said members of the association are undertaking loan restructures for qualifying borrowers as part of the efforts to address cash flow challenges occasioned by interruptions of supply chains and overall business stress.

The statement said that between March and May when the lock down was in effect, financial institutions waived off some charges on some of the banking services.

The financial institutions also individually and collectively mobilized support towards the fight against COVID-19 in the country in cash and kind totaling to 3 billion shillings (821,917 U.S. dollars).

UBA said it would engage the central bank and the country’s ministry of finance to discuss the challenges which affect the operational efficiency of the banking sector.