Louis Kasekende: Overview of the Ugandan economy
Opening remarks by Dr Louis Kasekende, Deputy Governor of the Bank of Uganda, at a
workshop for launch of the revised reporting returns for commercial banks, credit institutions
and MDIs, Kampala, 19 February 2010.
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The Executive Director Supervision
The Executive Director Research/Directors
Staff of Bank of Uganda
Staff of Commercial Banks, Credit Institutions, Microfinance Deposit taking Institutions, and
Bank of Uganda
Distinguished Resource Persons
Ladies and Gentlemen.
Good morning.
You are once again very welcome to this workshop concerning the launch of the revised
reporting forms of assets and liabilities for financial institutions supervised by Bank of
Uganda. Thank you for honoring our invitation and for your continued close cooperation with
the Bank of Uganda, in the pursuit of overall macroeconomic stability for our country.
Ladies and gentlemen, on account of prudent macroeconomic management, the Ugandan
economy has remained resilient on the whole in the face of the global financial crisis, which
later culminated into a global economic recession. The gradual effects of the global
economic slowdown on the Ugandan economy can be viewed from two angles: first, there
was a sudden exit of offshore players in September and October 2008. Second, the balance
of payments was adversely affected through reductions of export earnings in some sectors,
portfolio flows, interest income on offshore investments, and remittances. The Bank of
Uganda responded by letting the economy adjust to these exogenous shocks through the
flexible exchange rate policy stance. Secondly, Bank of Uganda continued to pursue a
monetary policy stance to ensure price stability. Most recently, Bank of Uganda's monetary
policy has aimed at boosting aggregate demand in the economy in order to support
economic growth. The recovery of the balance of payments is now being observed. There is
now stability in the financial markets and rapid reduction of inflation.
Overall, real GDP turned out to be 7.1 percent in the financial year 2008/09 and is projected
at 6.3 percent for this financial year 2009/10. Despite the economic slowdown, this
performance remains remarkable given that the IMF (World Economic Outlook, January
2010) projection for Sub Saharan African region is only 1.5 percent for 2009 and 4.3 percent
for 2010.
It is worth noting that the financial sector has continued to remain safe and sound on account
of prudent risk-based supervision and regulation. The sector was not affected by the toxic
assets that led to the global financial crisis in the first place. Particularly, the banking sector
in Uganda has not suffered the large deterioration in asset quality that affected banks in
many countries. The average capital adequacy ratio of Ugandan banks has remained well
above the prudential minimum of 12 per cent for the past three years and the banks' overall
liquidity remained good.
However caution should be exercised to ensure that, in the medium to long term, banks
remain solvent, profitable and liquid while allowing for increased intermediation to finance
economic activity. In addition, it is important that financial innovation and outreach continue
to take place to meet customer needs. In this regard, the Bank of Uganda, in 2009 set up the
Financial Stability Department which was charged with the mission of identifying and
assessing potential systemic risks to the structure and functioning of the financial system and
to develop measures to reduce those risks.
Bank of Uganda will continue to pursue a monetary policy stance aimed at boosting
aggregate demand and growth while maintaining price stability. The Bank of Uganda also
intends to introduce major reforms to the monetary policy in the next five years; which will
include shifting to an inflation targeting regime as well as the transition to a single currency in
the East African Community.
I wish to stress that to enable adoption of these new reforms as well as a smooth transition to
a monetary union and advancement of data harmonization efforts in the East African
Community; it is of paramount importance that financial institutions, among other data
providers, submit timely and accurate statistics, based on international best practice. The
reporting forms, which we are about to launch, have been designed to enable you to submit
data to Bank of Uganda, which is comparable across nations both within and outside the
East African Community. These revised forms will enable Bank of Uganda to collect more
comprehensive and appropriate data to guide the conduct of monetary and credit policies.
Finally, I thank you for all the efforts you have put in, the comments and feedback on the
proposed changes, as all of these have enabled the revision of the reporting forms to be a
success. We look forward to your continued efforts in the improvement of the quality of
statistics.
I wish you fruitful deliberations during this half day workshop.
I now declare the new reporting forms launched.
I thank you.