Private sector credit declined 0.2 percent in June 2023

KAMPALA – The total value of private sector credit [PSC] approved in June 2023 for disbursement by local commercial banks declined by 0.2 percent to about Shs 1.2 trillion, from about Shs 1.6 trn in the previous month, according to the latest performance of the economy report published by the Finance ministry.

According to a report, the loans released in June translated into an approval rate of 62.8 percent, which was lower than the approval rate of 67.6 percent registered in May 2023.

The report attributed the reduction in the value of approved credit in June to risk aversion among commercial banks, driven by an increase in the ratio of non-performing loans to total gross loans which rose from 5.57 percent in May 2023 to 5.93 percent in June 2023.

During the month under review, personal and household loans; agriculture, building, construction and real estate, and trade accounted for the largest share of credit extended to the private sector at Shs 279.3 billion, Shs 240.5bln, Shs 234.4bln and Shs 198.4bln respectively.

Meanwhile, according to the report, the weighted average lending rates for shilling-denominated credit reduced from 20.14 percent in May 2023 to 18.41 percent in June 2023. ‘The decline in lending rates was partly due to an increase in prime borrowers who were able to access credit at lower rates owing to their good credit rating with banks.”

On the other hand, the lending rates for foreign currency-denominated credit increased to 8.83 percent in June 2023, up from 8.50 percent recorded in the previous month.

Total PSC stock

On the other hand, the stock of total outstanding PSC declined by 0.6 percent to Shs 20.4trn in June 2023 from Shs 20.5trn in May 2023. ‘This decline was partly attributed to the valuation loss of foreign credit brought about by the appreciation of the shilling against the US dollar in June 2023.”

The report says of the total stock in June 2023, Shs 14.3trn was shilling-denominated credit while Shs 6trn was foreign currency-denominated credit.

Gov’t securities

The report says during the month of July 2023, three primary market auctions for securities were undertaken. A total of Shs 1,09 trn [at cost] was raised. Of this, Shs 561.62bln was from treasury bills while Shs 526.28bln was from treasury bonds.

The report adds of the amount raised, securities worth Shs 335.29bln were issued for the refinancing of maturing debt whilst Shs 752.60bln went towards financing other items in the government budget.

https://thecooperator.news/stock-of-outstanding-credit-falls-govt-report/

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