Africa-Press – Uganda. The Ministry of Finance, Planning, and Economic Development in its economy report of February 2021 has said the value of loans approved in January for the private sector declined to Shs533.9 billion compared to Shs1.198 trillion approved the previous month.
The ministry explains that there was a reduction in both credit applications and approvals in January, partly attributed to the service disruptions resulting from election-related activities.
During the period, the Ministry of Finance says the stock of outstanding private sector credit increased by 0.4 per cent to Shs17.911 trillion in January 2021 from Shs17.845 trillion in the previous month.
The ministry explains that the slow-down in growth from 2.2 per cent recorded in December 2020 was due to the lower value of loans approved during the month and in part reflects the low private sector economic activities around the election period.
In the economic report of December 2020, the Ministry of Finance said there was an increase in the growth of outstanding private sector credit to 2.1 per cent in December 2020 from 0.8 per cent recorded in November 2020, due to continued recovery of economic activity.
Giving a sector breakdown in the February economy report the Ministry of Finance says by sector, Personal Loans and Household loans received the largest share of credit approved in January 2021 at 25.2 per cent, followed by trade (19.4 per cent) and Agriculture (13.6 per cent).
Mining and Quarrying 0.2 per cent, Business Services & Community, Social and other services 13.5 per cent.The building, Mortgage, Construction and Real Estate 9.8 per cent, Transport and Communication, Electricity, and Water 10.7 per cent, Manufacturing 7.6 per cent.
Lending rates
In February 2021, the Bank of Uganda maintained the Central Bank Rate (CBR) at 7 per cent as inflationary pressures are projected to remain subdued in the coming months. The low CBR is expected to support the economic recovery process.
The Ministry of Finance said in the report that Commercial banks’ Shilling denominated lending rates edged downwards in January 2021, decreasing slightly to a weighted average of 17.4 per cent from 17.5 per cent in December 2020.
“This movement is partly attributed to the accommodative monetary policy stance and subsiding credit risks,” said the Ministry of Finance in the economic report of February 2021 portraying development that took place in the Month of January 2021.
Adding: “Similarly, Foreign currency lending rates decreased from a weighted average of 5.6 per cent to 4.7 per cent over the same period.”
Government securities
In the government securities, which includes treasury bills and treasury bonds that the government issues through the Bank of Uganda to finance the fiscal operations due to deficit in revenue collection from domestic taxes.
The Ministry of Finance explains that during the month, there were 2 T-Bill auctions and 2 T-Bond auctions in the primary market. Shs1.508 trillion (at cost) was raised, of which Shs532.47 billion was from T-Bills and Shs975.65 billion was from T-bonds.
