Commercial banks borrowed Shs155b from Bank of Uganda (BoU) between October 2020 and April 2021 to boost their operations amid liquidity and functional challenges, the latest report from the central bank shows.
This is an increase by Shs45b from the last quarter that ended in September 2020, as per the June Bank of Uganda Monetary Policy Statement.
Bank of Uganda Governor Emmanuel Tumusiime Mutebile said the liquidity support helped to stabilise bank-to-bank interest rates that had been threatened by Covid-19 related shocks.
However, the banks are not mentioned.
The money is part of the Covid-19 Exceptional Liquidity Assistance Facility and the Lombard Window that the central bank set up to help commercial bank stay afloat as Covid-19 batters the economy. In April last year, the Central Bank established emergency liquidity assistance measures, in which it sought to shore up capital and funding gaps among some supervised financial institutions whose operations had been affected by Covid-19.
Uganda’s commercial banks recorded the third drop in full year profits in 10 years weighed down by increased operating expenses amidst slow business activities as a result of coronavirus pandemic, according to BoU.
The banks’ net profit for the financial year ended December 2020 dropped by 4.4% to Shs848.5billion compared to Shs887.5billion the previous year.
BoU says the overall risk to financial sector stability edged up marginally in the year to December 2020, but remained relatively contained by BOU policy action implemented over the pandemic period.
However, several potential vulnerabilities remain, related to the pace of the economic recovery and its effect on the income and loan repayment capacity of firms and households and banks’ loss absorbency, BoU