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Uganda Banking Sector Ends Year 2011 High


As the curtain drops on 2011, activity in the banking industry is clearly at levels much higher than at the begining of the year.

Not only has the number of licenced commercial banks grown to 24 during the year, headline inflation grew to an 18 year high
of 30.4% in October. Inflation however, dropped to 29% in November, with experts predicting a likely stall or fall in prices after
the Christmas period.

Bank of Uganda has on the other hand resolved to keep its monetary policy unchanged in December. The Governor Emmanuel Mutebile said
that it would be premature to loosen monetary policy until there is a big drop in annual inlfation rates.

Since inception in July 2011, the Uganda Central Bank Rate has consecutively been adjusted upwards in efforts to curb inflation.
And results are begining to show as commercial bank prime lending rates have risen to an average of 29.5 percent, from 18 percent
earlier in the year.

Bank of Uganda has been observing a tight monetary stance from the start of 2011, mopping significant liquidity out of the economy
by issuing treasury bills and Repos in the interbank market.

Adam Mugume, the Bank of Uganda Exeutive Director Research, pointed out that economic growth is expected to slow to 5 percent from 6.7 percent
under the tight monetary policy.

The Bank also predicted that consumer preferences would change in 2012 as disposable income reduces, with the Uganda Central Bank looking
to attain a 5 percent core inflation towards the climax of 2013.

The tight monetary policy stance has so far resulted in rapid shilling appreciation to an average of 2360/2369 buying and selling respectively
against the US Dollar from the all time lows seen in September 2011.

US Dollar inflows have also continued to stream into the country, further bolstering the shilling as interest rates on treasury instruments
reached highs of 23 percent. This was unimaginable last year in December when they averaged 8.3 percent.

It is also worth noting that during the year 2011, the Uganda Central Bank received 3 accolades.

1) Mutebile was awarded the Best Central Bank Governor in Africa 2011 Award, where he was lauded for championing Uganda's economic transformation
from the years of war.

2) The Uganda 50,000 shilling Note was voted the Banknote of 2010 by the Washington-Based International Banknote Society for its strong design elements.

3) The entire 2010 Uganda bank note series were voted Best New Bank Series for their excellent mix of artistic and security features and the
International Currency Conference in Singapole.

Surfice to this, Uganda will play host to more than 3500 bankers across Africa in may 2012 as the Africa Regional Society for Worldwide International
bank Financial Telecommunication (SWIFT) comes to Kampala for the very first time.

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