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Last week, the Bank of Uganda, on behalf of Government, held a bond switch auction. Here is what it means for investors in treasury bonds.

It means that on January 6, 2021, investors were given a chance to convert any bonds which are maturing on January 21, 2021 into other bond/s which will mature at a later point in time. It was optional and some primary dealer banks chose to participate. If you are part of a savings group or are an individual investor and were not contacted about this option, then this move does not affect your investment. If you are holding any bond/s set to mature on 21 January 2021, the Government will pay both the principal and interest as they fall due.

Government of Uganda remains committed to honoring its obligations, and Government securities are one of the safest investments in the market because they are risk-free.
Progress on Covid-19 Vaccines Improves Economic Outlook

Risks to the economic outlook in the near term have brightened with the progress on the Covid-19 vaccines, signs of recovery in private demand and the additional boost to growth expected from fiscal policy, according to the Bank of Uganda Monetary Policy Report December 2020

“The economic outlook is extremely uncertain, due to the unpredictable course of the virus, election related factors, continued weakness in global economic activity, weather-related natural disasters and escalation of geopolitical tensions, trade policy uncertainty and technology fractions.

The downside risks to the economic growth projection include the possibility of an increase in new infections and a longer period to get the virus under control, periodic spouts of global financial market volatility, and increasing protectionism by trading partners,” the report reads in part.

The private sector credit extensions could remain subdued due to increasing Non-Performing Loans (NPLs), high lending interest rates in the face of weak economic activity and increase in domestic financing of the fiscal deficit, according to the December 2020 Monetary Policy Report.

“On the upside, however, economic growth could recover swiftly if global economic growth strengthens, private sector credit recovery is sustained, and the vaccine is widely distributed.”

To access the entire Bank of Uganda December 2020 Monetary Policy Report, please click on this Link https://bit.ly/34zsXeq
Monetary Policy Statement for December 2020

The Bank of Uganda, at the Monetary Policy Committee (MPC) meeting of December 2020 has maintained the Central Bank Rate (CBR) at 7 percent.

The MPC noted that since the last meeting in October 2020, the economic recovery has gradually gained traction, in line with projection for economic growth of above 3 percent in FY2020/21. Indeed, the high frequency indicators of economic activity in the quarter to October 2020 indicate an annual growth of 3.3 percent in contrast to the sharp contraction of 6 percent in the quarter to June 2020. However, the recovery is proceeding at an uneven pace. Social distancing measures continue to weigh heavily on certain activities of services sector, particularly in hospitality and tourism, while other sectors are still feeling the lagged effects of the economic downturn. Economic activity is expected to take longer to recover and resource utilisation to return to normal given the sharp contraction experienced in the quarter to June 2020. Economic growth is therefore projected to remain below its potential until FY2023/24.

Risks to the economic outlook in the near term have eased as a result of signs of a rebound in both foreign and domestic demand which could be bolstered by optimism associated with Covid-19 vaccine development. Nevertheless, the rising Covid-19 cases in Uganda and many other countries, present considerable downside risks. In addition, weather-related natural disasters, pro-cyclical private sector credit growth, increasing non-performing loans and high lending interest rates, trade protectionism by Uganda’s trading partners, still pent-up global demand, persistent geopolitical tensions, global trade policy uncertainty and technology fractions pose challenges to domestic economic growth. These coupled with the increasing fiscal financing pressures pose significant downside risks to the growth outlook. On the upside, while it could take some time to fully implement worldwide, the recent news on Covid-19 vaccine development is reassuring and presents positive prospects.
Inflation remains benign reflecting a combination of both global and domestic developments. Falling food crop and energy prices pushed headline inflation down to 3.7 percent in November 2020 from 4.5 percent in October 2020. Core inflation also declined to 5.8 percent from 6.3 percent.

The inflation outlook has been revised downwards compared to the October 2020 forecast round owing largely to considerable spare capacity in the economy. Inflation is now projected in the range of 5-6.5 percent in 2020 before converging to its medium-term target of 5 percent. There are however risks to these forecasts. On the upside, a more depreciated exchange rate, increase in food prices due to weather related shocks, rebound in international commodity prices, and a faster than anticipated global economic recovery due to the discovery of Covid-19 vaccines could put upward pressure on domestic inflation. On the other hand, lower than anticipated fiscal spending and sustained global and domestic economic weakness would exert downward pressure on domestic inflation.

There is still considerable uncertainty surrounding economic developments and there is need for monetary policy to remain accommodative until the economy sustainably normalises since inflation is projected to be well contained over the medium-term. Against this backdrop, the MPC decided to keep CBR rate unchanged at 7 percent and maintain liquidity support to supervised financial institutions. The band on the CBR has also been maintained at +/-2 percentage points, while the margin on the rediscount rate and bank rate is unchanged at 3 and 4 percentage points on the CBR, respectively. Consequently, the rediscount rate and the bank rate have been maintained at 10 percent and 11 percent, respectively.

Prof. Emmanuel Tumusiime-Mutebile
GOVERNOR
December 14, 2020
The Monetary Policy Committee (MPC) meeting for December is scheduled for Monday, December 14, 2020. Thereafter, the Monetary Policy Statement will be published on the Bank's online platforms.
Exchange Rates
Exchange Rates
How the Central Bank can help you_ NTV interview with Dr. George W. Ssonko https://youtu.be/sBmkgpAKjKs
Exchange Rates
ACF Using Block Allocation to Help Smallholder Farmers

The Agricultural Credit Facility (ACF) has devised a path-breaking innovation of block allocation to enable farmers access loans based on alternative collateral such as chattel mortgages, cash flow based financing, and character-based loans, among others, Dr. Michael Atingi-Ego, Deputy Governor, Bank of Uganda, has revealed.

“This innovation is unlocking access to credit in areas with communal land tenure; and most especially, for micro and smallholder farmers who are otherwise excluded for lack of collateral to secure credit.

“By September 2020, the ACF had advanced UGX 2.8 billion to 187 small and micro borrowers with non-traditional collateral under block allocation,” he said.

The ACF is administered by the Bank of Uganda on behalf of the Government of Uganda.

The Deputy Governor said that through this innovation, the ACF working with the participating institutions, has extended loans of up to UGX 20 million to small-scale farmers.

He further said that block allocations support financial inclusion and advance equity in economic activity by serving women and youths with limited property rights.

Dr. Atingi-Ego made the remarks just before he a launched the 2020 Agricultural Finance Yearbook at Imperial Royal Hotel, Kampala.

To read his entire speech, click on this link. https://bit.ly/37OPLHX
Exchange Rates
Exchange Rates
Exchange Rates

Bank of Uganda (BoU) is the Central Bank of the Republic of Uganda. The primary purpose of the Bank is to foster price stability and a sound financial system.

Together with other institutions, it also plays a pivotal role as a centre of excellence in upholding macroeconomic stability.

Operating as usual

11/01/2021

Last week, the Bank of Uganda, on behalf of Government, held a bond switch auction. Here is what it means for investors in treasury bonds.

It means that on January 6, 2021, investors were given a chance to convert any bonds which are maturing on January 21, 2021 into other bond/s which will mature at a later point in time. It was optional and some primary dealer banks chose to participate. If you are part of a savings group or are an individual investor and were not contacted about this option, then this move does not affect your investment. If you are holding any bond/s set to mature on 21 January 2021, the Government will pay both the principal and interest as they fall due.

Government of Uganda remains committed to honoring its obligations, and Government securities are one of the safest investments in the market because they are risk-free.

21/12/2020

Progress on Covid-19 Vaccines Improves Economic Outlook

Risks to the economic outlook in the near term have brightened with the progress on the Covid-19 vaccines, signs of recovery in private demand and the additional boost to growth expected from fiscal policy, according to the Bank of Uganda Monetary Policy Report December 2020

“The economic outlook is extremely uncertain, due to the unpredictable course of the virus, election related factors, continued weakness in global economic activity, weather-related natural disasters and escalation of geopolitical tensions, trade policy uncertainty and technology fractions.

The downside risks to the economic growth projection include the possibility of an increase in new infections and a longer period to get the virus under control, periodic spouts of global financial market volatility, and increasing protectionism by trading partners,” the report reads in part.

The private sector credit extensions could remain subdued due to increasing Non-Performing Loans (NPLs), high lending interest rates in the face of weak economic activity and increase in domestic financing of the fiscal deficit, according to the December 2020 Monetary Policy Report.

“On the upside, however, economic growth could recover swiftly if global economic growth strengthens, private sector credit recovery is sustained, and the vaccine is widely distributed.”

To access the entire Bank of Uganda December 2020 Monetary Policy Report, please click on this Link https://bit.ly/34zsXeq

14/12/2020

Monetary Policy Statement for December 2020

The Bank of Uganda, at the Monetary Policy Committee (MPC) meeting of December 2020 has maintained the Central Bank Rate (CBR) at 7 percent.

The MPC noted that since the last meeting in October 2020, the economic recovery has gradually gained traction, in line with projection for economic growth of above 3 percent in FY2020/21. Indeed, the high frequency indicators of economic activity in the quarter to October 2020 indicate an annual growth of 3.3 percent in contrast to the sharp contraction of 6 percent in the quarter to June 2020. However, the recovery is proceeding at an uneven pace. Social distancing measures continue to weigh heavily on certain activities of services sector, particularly in hospitality and tourism, while other sectors are still feeling the lagged effects of the economic downturn. Economic activity is expected to take longer to recover and resource utilisation to return to normal given the sharp contraction experienced in the quarter to June 2020. Economic growth is therefore projected to remain below its potential until FY2023/24.

Risks to the economic outlook in the near term have eased as a result of signs of a rebound in both foreign and domestic demand which could be bolstered by optimism associated with Covid-19 vaccine development. Nevertheless, the rising Covid-19 cases in Uganda and many other countries, present considerable downside risks. In addition, weather-related natural disasters, pro-cyclical private sector credit growth, increasing non-performing loans and high lending interest rates, trade protectionism by Uganda’s trading partners, still pent-up global demand, persistent geopolitical tensions, global trade policy uncertainty and technology fractions pose challenges to domestic economic growth. These coupled with the increasing fiscal financing pressures pose significant downside risks to the growth outlook. On the upside, while it could take some time to fully implement worldwide, the recent news on Covid-19 vaccine development is reassuring and presents positive prospects.
Inflation remains benign reflecting a combination of both global and domestic developments. Falling food crop and energy prices pushed headline inflation down to 3.7 percent in November 2020 from 4.5 percent in October 2020. Core inflation also declined to 5.8 percent from 6.3 percent.

The inflation outlook has been revised downwards compared to the October 2020 forecast round owing largely to considerable spare capacity in the economy. Inflation is now projected in the range of 5-6.5 percent in 2020 before converging to its medium-term target of 5 percent. There are however risks to these forecasts. On the upside, a more depreciated exchange rate, increase in food prices due to weather related shocks, rebound in international commodity prices, and a faster than anticipated global economic recovery due to the discovery of Covid-19 vaccines could put upward pressure on domestic inflation. On the other hand, lower than anticipated fiscal spending and sustained global and domestic economic weakness would exert downward pressure on domestic inflation.

There is still considerable uncertainty surrounding economic developments and there is need for monetary policy to remain accommodative until the economy sustainably normalises since inflation is projected to be well contained over the medium-term. Against this backdrop, the MPC decided to keep CBR rate unchanged at 7 percent and maintain liquidity support to supervised financial institutions. The band on the CBR has also been maintained at +/-2 percentage points, while the margin on the rediscount rate and bank rate is unchanged at 3 and 4 percentage points on the CBR, respectively. Consequently, the rediscount rate and the bank rate have been maintained at 10 percent and 11 percent, respectively.

Prof. Emmanuel Tumusiime-Mutebile
GOVERNOR
December 14, 2020

11/12/2020

The Monetary Policy Committee (MPC) meeting for December is scheduled for Monday, December 14, 2020. Thereafter, the Monetary Policy Statement will be published on the Bank's online platforms.

11/12/2020

Exchange Rates

10/12/2020

Exchange Rates

10/12/2020

YouTube

How the Central Bank can help you_ NTV interview with Dr. George W. Ssonko https://youtu.be/sBmkgpAKjKs

youtube.com

09/12/2020

Exchange Rates

08/12/2020

ACF Using Block Allocation to Help Smallholder Farmers

The Agricultural Credit Facility (ACF) has devised a path-breaking innovation of block allocation to enable farmers access loans based on alternative collateral such as chattel mortgages, cash flow based financing, and character-based loans, among others, Dr. Michael Atingi-Ego, Deputy Governor, Bank of Uganda, has revealed.

“This innovation is unlocking access to credit in areas with communal land tenure; and most especially, for micro and smallholder farmers who are otherwise excluded for lack of collateral to secure credit.

“By September 2020, the ACF had advanced UGX 2.8 billion to 187 small and micro borrowers with non-traditional collateral under block allocation,” he said.

The ACF is administered by the Bank of Uganda on behalf of the Government of Uganda.

The Deputy Governor said that through this innovation, the ACF working with the participating institutions, has extended loans of up to UGX 20 million to small-scale farmers.

He further said that block allocations support financial inclusion and advance equity in economic activity by serving women and youths with limited property rights.

Dr. Atingi-Ego made the remarks just before he a launched the 2020 Agricultural Finance Yearbook at Imperial Royal Hotel, Kampala.

To read his entire speech, click on this link. https://bit.ly/37OPLHX

08/12/2020

Exchange Rates

07/12/2020

Exchange Rates

04/12/2020

Exchange Rates

03/12/2020

Macroeconomic indicators' table

Frequently requested indicators for 12 months (November 2019 to November 2020) http://bit.ly/2QXaeSw

03/12/2020

Exchange Rates

02/12/2020

Exchange Rates

01/12/2020

VIDEO: IGC-BOU Policy Seminar on Lending Rates #LendingRatesUG

01/12/2020

Exchange Rates

30/11/2020

Policy Measures Have Contained Risks to Financial Stability

Near-term risks to financial stability arising from the COVID-19 pandemic have been relatively contained through timely policy measures, according to the recent Bank of Uganda Quarterly Financial Stability report.

“However, the outlook remains highly uncertain and depends on the evolution of the pandemic and the pace of economic recovery,” the report reads in part.

To read the entire report, please click on this link https://bit.ly/36loFbV

30/11/2020

Recognize that the structure of bank balance varies for the different sizes of banks, therefore the recommendations cannot fit all.
There is need to rethink them and break them down to suit the different banks.

30/11/2020

How do we reduce overhead costs that are constraining lending? there is need to reform in the area of commercial justice to reduce costs and time spent in litigation; link national IDs to the CRB and thirdly can government become more frugal - there is a huge appetite for borrowing.
Commercial banks should carry out sufficient project analysis before lending. Lastly, there is need for increased financial literacy training.

30/11/2020

Why are NPL's on the rise? Because of the risk associated with borrowing. Up-till now there has not been a link between national ID's and the CRB, these are structural rigidities still existent in Uganda.

30/11/2020

Recognize that the structure of bank balance sheets varies for the different sizes of banks, therefore the recommendations can not fit all. There is need to rethink them and break them down to suit the different banks

30/11/2020

Continuously leveraging on technology and mobilizing larger deposits would serve to reduce operating costs which are a large driver of high lending interest rates

30/11/2020

Banks in Uganda lend predominantly against immovable assets i.e. Buildings and land and yet 48% of people do not own land.

30/11/2020

High government borrowing, especially if not channeled to investment is detrimental; becomes expensive, disincentives banks and increases bank risk aversion

30/11/2020

Bank of Uganda

LIVE: ICG-BOU POLICY SEMINAR; Why are lending rates high in Uganda?

30/11/2020

Typically, banks are expected to lend to consumers and businesses, but loans make up 50% or less, a large percentage of loans are to the government.

30/11/2020

If financial intermediation is done well, the interest rate spreads should be small, but in Uganda the difference is big.
The high interest spread with high cost of borrowing affects growth of business and their profitability and handicaps economic growth

30/11/2020

Large banks tend to have high interest rate spreads but relatively low operating costs; while smaller banks have relatively lower interest rate spreads but high operating costs.
Encouraging more competition between banks specifically growth in smaller and medium sized banks to challenge the dominant. large players

30/11/2020

High interest spreads in Uganda could be driven by high operational and administrative costs.
Operating costs are indeed the largest component of interest rate spreads, contributing 61% between 2008 and 2018, followed by loan loss provisions at about 12%

30/11/2020

Compared to other countries, the level of loans in Uganda's banking sector is low while holdings of government securities are high: "why make risky loans when I can hold risk-free government securities?
"

30/11/2020

Ugandan banks are highly capitalized compared to regional peers, which is expensive to maintain

30/11/2020

Indicators of profitability in Uganda show that Uganda's banks profitability is not excessively high

30/11/2020

Compared to Regional peers, in a period between 2007 and 2018, it is clear that interest rate spreads in Uganda have been consistently high

30/11/2020

Videos (show all)

VIDEO:  IGC-BOU Policy Seminar on Lending Rates #LendingRatesUG
LIVE: ICG-BOU POLICY SEMIAR
VIDEO: Governor's Statement on Reforms to the Primary Dealership System
Monetary Policy Statement for August 2020
Monetary Policy Statement for June 2020
Monetary Policy Statement for April 2020 (Luganda Version)
Logo Looper
Post CBR engagement, Cryptocurrency and Writing on Banknotes
All you need to know about Loan Management by Economist Jonah Waiswa
VIDEO: The Deputy Governor, Bank of Uganda, Dr.  Louis Kasekende and the CEO, Deposit Protection Fund of Uganda, Mrs. Ju...
How to Redeem your Damaged Notes and Coins from Bank of Uganda

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