The rational decision to take a loan pre-2011 with knowledge that the borrow will be able to pay it back with interest in installments of Ushs. 100,000 per month, has turned out to be a suicidal decisions.
Bankers increased interest amounts on loans, and the borrower’s repayment installments were revised upward to Ushs. 200,000; a one hundred percent increase! While, in 2013, commercial banks reduced their lending rates, it seems that none have reduced them back to the original rates pre-2011.
Raising policy rates by Bank of Uganda (BoU) gave justification to commercial banks to increase their lending rates without any restrictions.
- Did BoU factor in the possible negative consequences that may occur from its decision to raise rates?
- Did it stipulate possible antidotes to such consequences?
- Now that the ‘unintended’ consequences are with us, does BoU have a role to play in ameliorating them?
These and many more questions are begging answers.
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.
Post featured photo credit: Emmanuel Owaraga
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