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Economy Got An Accident – Minister Kasaija

Finance Minister, Matia Kasaija

The Banking industry has defended its changing mode of operation which sections of the public describe as less friendly, saying they have learnt from the effects of global shocks on the businesses and economies generally.

In recent times, Bank of Uganda has compelled commercial banks to increase their lending rates even as the demand for credit was already slowing down this year.

The central bank says the lenders are more conscious about lending because of the increasing risk of defaulting among Ugandans.

Deputy Governor, Bank of Uganda, Michael Atingi-Ego says following what has happened to corporations and economies around the word, there is need for all enterprises to be dynamic in their policies and be able to adapt to situations.

He says if the industry is to be confident of surviving future shocks even better, more effort must be put into resilience, cautious approach to service delivery and digital innovation.

Uganda, like most countries around the world has endured a slowdown in economic activity attributed to both local and domestic factors. Uganda’s economic growth for 2021/22 was revised downwards to 3.8 percent from the initial projection of 6 percent, following the sudden rise in global commodity prices that triggered a spiral in inflation.

On the domestic scene, harsh weather especially a long drought in the first half of this year affected the agriculture output, and the sector is not yet sure of how the second season will be.

The poor harvest came when the country was already suffering rising commodity prices especially dew to the rising costs of imported commodities like fuel.

Matia Kasaija, the Minister for Finance, Planning and Economic Development says the government had set ambitious growth targets because of the measures they had put in place.

However, the rapid change in the economic environment like the onset of the COVID-19 pandemic, the rapid rise in international prices especially after Russia invaded Ukraine, as well as harsh climatic conditions that affected agriculture, reversed the growth projections.

Speaking at the 27TH Seminar of the Institute of Certified Public Accountants of Uganda, ICPAU, the Managing Director Post Bank Uganda, Julius Kakeeto said in a changing world, it does not matter how big a company is, it can collapse if it does not adjust to challenges.

“Nokia didn’t do anything wrong in their business, however, the world changed too fast. Their opponents were too powerful. They missed out on learning, missed out on changing, and they lost the chance to survive,” said Kakeeto.

Speaking on the topic “How can accountants use Strategic Mindset Shift to effect positive Business Development?” Kakeeto said that current events that have reshaped the global economy were never thought of, including the Russia-Ukraine war, COVID-19 and its effects.

Chief executives of corporations say while such shocks have disrupted the operation of businesses, the managers are faced with uncertain environment which makes it hard to make decisions and long-term policies.

Fabian Kasi, the Managing Director, Centenary Bank says the rapid changes surrounding the global economies call for enhanced ability by businesses and governments to detect and respond to currencies to limit damage.

Kasi says the rising interest rates at commercial banks is a response to what is happening in the economy, otherwise they would be increasing the risk of collapse.

In January, Uganda’s annual inflation rate was less than 3 percent, but has since risen to 7.9 percent, the highest in more than eight years. This has discouraged domestic demand and therefore productivity.

Richard Newfarmer, the International Growth Centre Country Director for Uganda, told the 6th High Level Economic Growth Forum that Uganda is among the countries in Africa that have managed inflation well, though the situation is not good.

Newfarmer says Uganda’s economy is at a greater risk than the current situation because the slowdown in the global economies means Uganda’s exports will continue facing challenges with orders already falling.

Deputy Governor, Michael Atingi-Ego said the COVID-19 pandemic was the stress test our banks, though it gave them a chance to prepare better for the future, because there are ongoing challenges like climate change that businesses and economies should manage effectively.


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