Humanist

These and many more questions are begging answers:

Did Bank of Uganda (BoU) factor in possible negative consequences that may occur from its decision to raise rates? Did it stipulate possible antidotes to such consequences? Now that ‘unintended’ consequences are with us, does BoU have a role to play in ameliorating them?

Yes, raising policy rates by BoU gave justification to commercial banks to increase their lending rates without any restrictions. Bankers increased interest amounts on loans, and borrower’s repayment installments were revised upward by a one hundred percent increase!

The rational decision to take a loan pre-2011 with knowledge that the borrower will be able to pay it back with interest in installments of Ushs. 100,000 per month, has turned out to be a suicidal decision. The borrower now has to pay it back in installments of Ushs. 200,000 per month.

While, in 2013, commercial banks reduced their lending rates, it seems that none have reduced them back to the original rates pre-2011.

Many are still unable to purchase sugar. Food stalls are laden with food, but many cannot afford it. We have moved full circle and we are back to the same point when food inflation rates soared!

This status quo does not facilitate improvement in the food security situation of Ugandans. The purchasing power of Ugandans continues diminished.