louis kasekende : bank of uganda ’ s role in monetary policy, regulation and financial sector development remarks by dr louis kasekende, deputy governor of the bank of uganda, at the opening ceremony of the colloquium of judges and magistrates on new laws and commercial products in the financial sector, kampala, 20 october 2014. * * * my lord, the deputy chief justice my lords, the honourable judges your worships, the magistrates the chairman and members of the uganda bankers association ( uba ) ladies and gentlemen. it is a pleasure and honour for me to have been invited to make a few remarks at this workshop for the judiciary and bankers. i would like to thank the organisers for once again inviting me to speak at such a distinguished forum. this forum serves as a platform for your lordships and worships together with the bankers to discuss issues pertinent to the financial services industry and to enhance your understanding of them. as is the case around the world, the industry in uganda is evolving very rapidly, with new products coming on the market. since its inauguration in 1981, the uganda bankers ’ association has become the primary forum for sharing knowledge and articulating the interests of the banking industry in uganda. the uba has understood the importance of reaching out to all stakeholders in society, including the judiciary, government, parliamentarians, the business community and the general public. in this address, i would like to share with you the strategy of the bank of uganda regarding the maintenance of financial stability. in particular, i will talk about the role of the central bank in the areas of monetary policy, regulation and financial sector development. the global financial crisis that erupted in 2008 prompted a re - thinking by central banks around the globe of how they approach economic and financial stability. in particular, there has been a recognition in the advanced economies that “ light touch regulation ” allowed financial institutions too much leeway to take reckless risks. central banks have also embraced the need for what is termed a macroprudential approach to analysing risks to the financial stability. prior to the financial crisis, the attainment of low and stable inflation was considered sufficient to ensure macroeconomic stability. it was thought that financial stability was the job of prudential regulation and that monetary policy should focus on inflation and output stabilization. however, it is now recognized that risks to financial stability can build up even when inflation is under control, for example risks which emanate from lending and asset price

the sector to avoid a decline in output. moreover, they also find that investments which raise productivity in agriculture also boost manufacturing growth, because agriculture is an important source of intermediate inputs for manufacturing. 2 uganda currently only allocates about 3. 5 percent of the government budget directly to agriculture. raising budgetary allocations to agriculture and for investment in rural areas should be a strategic priority. whether or not public spending on agriculture actually contributes to improving agricultural productivity depends on the nature of the spending. there is strong empirical evidence from around the world to indicate that the provision of public goods and services, which are defined as goods and services which because of their character cannot be supplied optimally by the market, have a large positive impact on agriculture with potentially very high social rates of return, if well designed and implemented. 3 examples of the type of public goods and services which are relevant for agricultural development in uganda include : i ) agricultural research and development, to produce improved farm technologies such as high yield seeds and to determine the optimal farm technologies for the conditions prevailing in uganda ; ii ) agricultural extension services to provide information and technical advice to farmers to adopt good agricultural practises and to use appropriate purchased inputs ; this can help farmers raise their yields ; iii ) the construction and especially the maintenance of rural feeder roads to reduce the cost of transporting agricultural produce to markets and raise farm gate prices ; in the data are from “ agriculture for inclusive growth in uganda ” inclusive growth policy note 2, world bank, 2012. lawrence bategeka and john matovu ( 2011 ), “ oil wealth and potential dutch disease effects in uganda ”, economic policy research centre. the evidence is surveyed in enrique blanco armas, camilo gomez osorio, blanca moreno dodson and dwi endah abriningrum ( 2012 ), “ agriculture public spending and growth in indonesia ”, policy research working paper 5977 world bank. bis central bankers ’ speeches terms of encouraging farmers to produce more output for their market, investment in rural feeder roads is more important than investment in main roads ; iv ) the provision of veterinary services and the control of plant diseases ; controlling animal and plant disease is an activity with very large positive externalities ; v ) the provision of market information, for example price information, to help farmers make more informed decisions about which crops to grow and to strengthen their ability to negotiate prices with traders. vi ) clarifying and strengthening land rights and the security of land tenure, to improve incentives for farmers to invest