peddled around by some commentators to the effect that the recent increase in non - performing loans of the banking industry from 4 percent in june 2015 to over 7 percent in june 2016 was mainly a result of high interest rates. the truth could not be far from this. while lending rates by commercial banks have increased since 2015, the current average lending rate of about 23 percent, defined by the global entrepreneurship monitor ( gem ) as the proportion of the adult population that reported having discontinued a business within a year page 3 of 7 on shilling denominated loans, is not out of line with their historical average over the last few years. in addition, a recent review by bank of uganda to ascertain the reasons for the non - performance of large credit facilities in commercial banks indicated that only a paltry 0. 3 percent of non - performing loans as at march 2016 could be attributed to high interest rates. diversion of funds away from the intended purpose of the loan was a major contributor to the non - performing loans, only surpassed by delayed payment by government ( domestic arrears ) and cost overruns / insufficient cash flows. the above three reasons inclusive of diversion of loaned funds and poor management accounted for about sixty five ( 65 ) percent of the large non - performing loans in our banking industry. the third relates to the feedback we have received from the public during the bank of uganda golden jubilee commemoration activities that involved townhall meetings, radio talk - shows and public exhibitions in mbale, gulu, arua and mbarara. a sentiment frequently expressed by the public related to a lack of transparency on charges and interest rates by financial institutions, complaints about customer care by these institutions, and lack of information about financial products and services. i believe all the above three issues can be dealt with by increasing financial education and stronger consumer protection coupled with developing the entrepreneurship and management competencies of individuals and the smes. with better financial literacy and enterprise management, it is not inconceivable page 4 of 7 to believe that uganda would have fewer financially distressed firms, a lower business failure rate, more employment creation and higher rate of savings and investment. uganda needs to pick a leaf from several of the asian countries that you may refer to as “ manufacturing and enterprise hubs ” by enhancing its entrepreneurial education and training in order to realize higher labor and enterprise competitiveness within the global economy. the latest estimates by the global entrepreneurship monitor, measuring the extent to which training in creating or managing smes is

continued monitoring. risk assessment risks to the economic growth outlook are on the downside, especially in the near term. the war against ukraine remains a significant downside risk to the economy. energy and food costs could also remain persistently higher than expected. there could be an additional drag on growth in the euro area if the world economy were to weaken more sharply than we expect. the risks to the inflation outlook are primarily on the upside. in the near term, existing pipeline pressures could lead to stronger than expected rises in retail prices for energy and food. over the medium term, risks stem primarily from domestic factors such as a persistent rise in inflation expectations above our target or higher than anticipated wage rises. by contrast, a decline in energy costs or a further weakening of demand would lower price pressures. financial and monetary conditions as we tighten monetary policy, borrowing is becoming more expensive for firms and households. bank lending to firms remains robust, as firms replace bonds with bank loans and use credit to finance the higher costs of production and investment. households are borrowing less, because of tighter credit standards, rising interest rates, worsening prospects for the housing market and lower consumer confidence. 3 / 4 bis - central bankers'speeches in line with our monetary policy strategy, twice a year the governing council assesses in depth the interrelation between monetary policy and financial stability. the financial stability environment has deteriorated since our last review in june 2022 owing to a weaker economy and rising credit risk. in addition, sovereign vulnerabilities have risen amid the weaker economic outlook and weaker fiscal positions. tighter financing conditions would mitigate the build - up of financial vulnerabilities and lower tail risks to inflation over the medium term, at the cost of a higher risk of systemic stress and greater downside risks to growth in the short term. in addition, the liquidity needs of nonbank financial institutions may amplify market volatility. at the same time, euro area banks have comfortable levels of capital, which helps to reduce the side effects of tighter monetary policy on financial stability. macroprudential policy remains the first line of defence in preserving financial stability and addressing medium - term vulnerabilities. conclusion summing up, we have today raised the three key ecb interest rates by 50 basis points and, based on the substantial upward revision to our inflation outlook, we expect to raise them further. in particular, we judge that interest rates will still have to rise significantly at a steady pace to reach levels that