BOU Governor Emmanuel Tumusiime-Mutebile said on Monday that many consumers are expected to be hesitant to resume their previous spending patterns, partly due to fears of contracting the virus and uncertainty about earnings. He added that even those whose incomes were not affected may increase their need for precautionary savings.
BOU Governor Emmanuel Tumusiime-Mutebile
expected to hold onto their money for longer compared to pre-coronavirus days
as many suspend spending due to insecurity of what the future holds, Bank of
Uganda has said.
BOU Governor Emmanuel Tumusiime-Mutebile said on
Monday that many consumers are expected to be hesitant to resume their
previous spending patterns, partly due to fears of contracting the virus and
uncertainty about earnings. He added that even those whose incomes were not
affected may increase their need for precautionary savings.
He hinted that low spending is bad for the economy as it means businesses
will get no demand for their products and therefore no growth. This also means that many
will further cut jobs as demand falls. Hundreds of Ugandans lost jobs between
March and July 2020 effectively cutting off their spending power.
Mutebile who was reading the monetary policy statement
for August 2020 explained that many of those who had money put it in banks on a “wait and
This month, BOU data showed that Ugandans are holding
more money in fixed deposits to the tune of 8.5 trillion Shillings, the highest
amount ever. This meant that many chose not to spend their cash because of the lockdown
but also because many aren’t sure when COVID-19 will go away.
Mutebile said that extreme uncertainty characterizes the outlook for the
economy. This will slow investment and growth. "Its recovery is heavily
dependent upon the intensity, spread, and duration of the COVID-19 pandemic,
particularly the heightened risks associated with the second wave of infections,"
The economy in 2020/21 is projected in the range of
3.0-4.0 per cent, further increasing to 5.0-6.0 per cent in 2021/22b financial
year. A widespread and possibly more severe second wave of
the virus, requiring a complete lockdown, as well as, the locust invasion will
wipe away this optimism.
“Low exports of goods and subdued tourism receipts
are projected to continue to weigh on economic growth given weaker global
demand,” BOU said.
BOU kept the Central bank rate (CBR) at 7 per cent for the
month of August. The CBR indicates the direction of interest rates and with
this BOU expects commercial banks to provide more money to Ugandans so that
they can spend.
It warns that increasing Non-Performing Loans (NPLs)
and high lending interest rates could delay recovery of loan extensions to
Mutebile is, however, optimistic that economic growth could turn out
stronger than projected if the spread of the virus is contained, or if a
vaccine or effective treatment is available earlier than is currently being