Uganda Banks opt for government securities and foreign Assets

Monday March 28, 2011

Local banks in Uganda are shifting their investments from credit to investing in foreign assets and risk- free government securities.

According to the Central Bank statistics, banks’ holding of government securities grew by 33% between October last year and January this year.

This according to Bank of Uganda clearly indicates local banks increased investments in government securities.

According to the central bank, the demand for credit and supply has reduced partly due to a shift by local banks to invest in foreign assets and government securities like the treasury bills.

Government securities are less risky than loans that have a higher risk which gives way to easy money for the banks.

The recovery of the global market and an increase in returns in the outside market has also led to growth of banks investments in foreign assets.

This means that part of their money is held outside. However the central bank says it is time for the banks to bring back these investments into the country.

The shillings have been under immense depreciation but the Central Bank is hopeful that the shilling will not be expecting a severe depreciation.