Finance & Banking

Stock of outstanding credit falls- gov’t report

KAMPALA– The stock of outstanding private sector credit in Uganda decreased by 2.5 percent to Shs 19.6 trillion in September 2022 from Shs 20trn in August 2022, according to the October Performance of the Economy Report released by the Ministry of Finance.

According to the report, Shs 13.6trn was shilling denominated credit while Shs 6trn was foreign currency denominated credit.

The report partly attributes the decrease in the stock of outstanding credit in the country to higher lending rates during the month of September.

However, the value of credit approved for disbursement in September 2022 amounted to Shs 1.4trn up from Shs 1.1trn in August 2022.

The report adds: “This represents an approval rate of 58.9 percent compared to 56.9 percent the previous month, signalling a high uptake for credit by the private sector during the month [September].”

Distribution of credit

According to the report, personal and household loans continued to account for the largest share of credit approved in September 2022 at Shs 413.8 billion [28.6 percent].

Other notable recipients of credit were Trade at Shs 384.0 billion [26.5 percent]; building, mortgage, construction and real estate at Shs 193.1 billion [13.3]; Business, Community, Social and other services at Shs 140.3 billion [9.7 percent] and agriculture at Shs 133.4 billion [9.2 percent]. “These five sectors constituted 87.3 percent of all the credit extended to the private sector during the month.”

Lending rates

Commercial banks’ shilling-denominated lending rates increased to an average of 18.24 percent in September 2022 from an average of 17.29 percent in August 2022, which was in line with the rising inflation and continued monetary policy tightening by the Bank of Uganda [BoU].

BoU has increased steadily increased the Central Bank Rate [CBR] from 6.5 percent in May 2022 where it had been maintained for 11 months to 10 percent in October 2022.

On the other hand, foreign currency denominated lending rates increased from a weighted average of 6.42 percent in August 2022 to a weighted average of 7.19 percent in September 2022.

Trading in government securities

The report says government securities auctioned during the month of October 2022 fetched Shs 561.60 billion [at cost]. Of this, Shs 489.32bln was from treasury bills while treasury bonds fetched Shs 72.27bln.

“Securities worth Shs. 352.75 billion were issued for the refinancing of maturing debt while Shs 208.84 billion went towards financing …government budget,” the report says, adding that there was an increase in demand for government securities as reflected by the bid to cover ratio, which rose to 1.90 in October 2022 from 1.74 recorded the previous month. “All auctions were oversubscribed during the month.”

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