Finance

World Bank action could affect Uganda borrowing elsewhere – Experts

FILE PHOTO: A participant stands near a logo of World Bank at the International Monetary Fund - World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. REUTERS/Johannes P. Christo/File Photo

KAMPALA, (UG): There is concern that the suspension by the World Bank of new loans to Uganda could influence other development finance institutions to take similar actions. If that happens, the country could be forced to take drastic measures and options to avoid the possible impact.

The World Bank is Uganda’s biggest lender accounting for about 4.5 billion dollars of the national debt estimated at about 23 billion Shillings with most of it going into infrastructure, health, education, and other social services.

Mr Charles Katongole, Standard Chartered Bank Head Financial Markets said the Bank of Uganda will now have to consider this development as it reviewed the monetary policy next week.

He said that already, the shilling showed weakness overnight against the dollar reversing the strengthening trend observed over the last few months.

The Uganda Shilling has been the only one in East Africa which was strengthening as the other currencies depreciated.

On Thursday, the dollar opened trading at 3,623 Shillings but by the end of the day, it was up against the local currency by a whole 110 shillings to exchange at 3,735, sending worries across the markets.

Katongole said the authorities must do something that will maintain Uganda’s attractiveness to lenders because global rating firms; Fitch and Moody’s had already slightly downgraded Uganda’s economy last year from B+ to B-.

This was because of a fall in the country’s foreign exchange reserves to 3.5 billion dollars, though due mainly to better export performance the reserves have since recovered to 4 billion.

Katongole says the Central Bank, while trying to sustain the shilling strength, should ensure reasonable reserve levels are maintained so as to maintain the availability of willing lenders to the country.

He was speaking at the Second Half 2023 Investors Summit, a joint initiative of Uganda Investments Authority and Standard Chartered, mainly focused on collaboration in business for sustainability.

Sanjay Rughani, Standard Chartered Chief Executive Officer said with proper collaboration in the industry, it was possible for developing countries to have sustained sources of financing.

He gave the example of the 300 billion dollars that Standard Chartered group is mobilizing globally for the financing of climate projects.

He hoped Uganda would be able to benefit from this fund which is part of the bank’s commitment to attain net zero emissions in their global operations.

Angelo Izama, a member of the UIA board on his part urged for collaboration between companies especially the small and medium, to make it easy for them to access affordable financing locally.

Izama gave an example of 2.7 trillion Shillings in deferred payments that the government gave as incentives to entrepreneurs, in the form of taxes, and training expenses among others.

These incentives, he said, could only be beneficial to SMEs if they combined resources to work together.

One of the reasons behind the theme was that collaboration is important in ensuring the success and sustainability of a business, especially as most Ugandan companies collapse within the first five years.

Former Finance, Planning, and Economic Development Minister Maria Kiwanuka decried the practice of Ugandan entrepreneurs of preferring sole proprietorship, which concentrates the risk of a business collapse on an individual.

Kiwanuka, who is the chairperson of the board at Standard Chartered reminded the investors that even the “Islamic Banking” that they are demanding, can only work where they are willing to open up to partnerships.

-URN

Do you have a story or an opinion to share? Email us on: dailyexpressug@gmail.com Or follow the Daily Express on or for the latest updates.



Daily Express is Uganda's number one source for breaking news, National news, policy analytical stories, e-buzz, sports, and general news.

We resent fake stories in all our published stories, and are driven by our tagline of being Accurate, Fast & Reliable.

Copyright © 2024 Daily Express Uganda. A Subsidiary of Rabiu Express Media Group Ltd.

To Top
Translate »