The Bank of Uganda reports a 7.8% increase in consumer borrowings for the three months to October, signaling a surge in demand for loans. During this period, consumer loan requests rose from Shs 6.0 trillion in July to Shs 8.7 trillion in October, with the value of approved loans increasing from Shs 3.9 trillion to Shs 5.1 trillion.
The surge in demand for loans is attributed to consumers building up inventory for the anticipated festive season and educational institutions seeking funds for working capital and operational needs. The central bank’s benchmark lending rate reduction, in line with easing inflation, has contributed to the increased appetite for loans.
The Bank of Uganda’s data also projects economic recovery, with growth expected to accelerate from 5.2% in FY2022/23 to 6.0% in FY2023/24. Factors contributing to this growth include the recovery of activity in industry, agriculture, construction, and services. Additionally, continued Foreign Direct Investment (FDI) inflow, especially in the extractive sector, and government investments in growth-enhancing programs are expected to support growth.
Despite the positive outlook, the Bank of Uganda notes uncertainties and risks, including adverse weather conditions affecting agricultural production, financial constraints on budgetary spending due to high external finance costs, and potential spikes in global commodity prices caused by geopolitical tensions. Slower global and regional economic activity could also impact Uganda’s exports.
In the medium term, growth is projected at 7%, driven by oil production and export activities. The growth outlook remains uncertain, with risks tilted to the downside, but potential upside factors include faster-than-expected inflation declines in advanced economies and favorable weather conditions.
