What you need to know:
- Shilling appreciation. In its highlights, the Central Bank also noted that the exchange rate appreciation trend had continued into September although depreciation pressures had emerged between September and August.
- The appreciation was supported by high inflows from remittances and transfers from non-government organisations, strong portfolio inflows from offshore players looking for higher yields and increased export earnings, from coffee and tea.
Loan applications fell in the quarter ended August, according to data from Bank of Uganda.
The fall, the Central Bank said, was a result of the slow pace in economic recovery with banks remaining cautious of what and who they lend to.
During the period ended August, according to the Central Bank, loan applications fell to Shs3.86 trillion from Shs5.41 trillion in the quarter ended May.
This, Bank of Uganda said, could have been a result of a reduction in demand for loans, worsened by a fall in the value and quality of assets.
Data also indicates that loan approvals fell to Shs2.26 trillion during the period compared to Shs2.36 trillion in the quarter ended May, driven by a cautious approach adopted by banks due to fear of Covid-19 related risks.
However, in highlights published in the Monetary Policy Report, the Central Bank said the economy had started to show sufficient recovery boosted by an increase in the uptake of vaccination, which might lead to the reopening of some critical sectors of the economy.
A number of economic sectors have remained closed for close to two years now, threatening to morph into a crisis that might have wider economic ramifications.
For instance, the education sector, which holds close to Shs2 trillion in bank loans, has remained closed, crippling its capacity to repay credit facilities that were already under obligation.
Last week, an umbrella organisation that brings together private school owners, noted there was urgent need for an intervention to save distrusted private schools that continue to choke on loans and failure to meet basic operational services.
It was also noted that private schools will need a stimulus package of about Shs500b to put operations of various schools back on line.
During the period to August, the Central Bank noted, personal and household, agriculture, manufacturing, trade and building-mortgage-construction and real estate sectors, were the most active in terms of loan applications.
The Central Bank also noted that during the quarter ended August, Private Sector Credit grew by 9.44 per cent compared to 7.37 per cent in the quarter ended May.
The growth, Bank of Uganda said, had been subdued during June and July but recovered in August due to easing of lockdown measures in July.
Bank of Uganda also noted that during the period, interest rates had declined to an industry average of 17.2 per cent from 18.8 per cent in the quarter to May in line with the accommodative monetary policy stance.
However, some sectors such as trade and household and personal loans experienced some volatilities with lending rates rising to an average of 18.3 per cent from 16.3 per cent.
Interbank interest rates remained well anchored around the Central Bank Rate (CBR) with the seven-day rate remaining relatively stable at 6.77 per cent.