Bank of Uganda recently released its annual report for 2022/2023. The report highlights the central bank’s performance in relation to its major obligation as the guardian of country’s economy. It also sheds light on the bank’s internal processes. Here are the 10 important take-aways from the report.
1. Economy grew by 5.3% beating projections
Probably the best news from the report is that the economy remained resilient in the FY 2022/23. Preliminary estimates from Uganda Bureau of Statistics (UBOS) show that the economy grew by 5.3 percent in FY 2022/23 higher than the revised growth of 4.6 percent in FY 2021/22 (Figure 6) reflecting economic recovery as global demand improves. Growth, according to the report, was largely driven by the services and industry sectors.
The services sector grew at 6.2 percent, 2.1 percentage point higher than the previous fiscal year growth, largely attributable to the expansion of trade and repair activities which contributed 8.3 percent to the sector growth. Real estate activities and education activities also made notable contribution to growth of the service sectors. The industry sector grew at 3.9 percent from the 5.1 percent registered the previous year largely driven by manufacturing and construction activities with 80 percent combined contribution to the increase of the sector growth.
2. Inflation target was not met
According to the report, Inflation was higher than the Bank’s 5 percent target for the most part of the FY 2022/23.
The central bank notes that inflation remained high reflecting effects of adverse weather conditions on agricultural output translating into higher food crops and other goods prices.
Headline and core inflation averaged 8.8 percent and 7.4 percent, respectively in FY 2022/23.
Headline inflation accelerated by 5.4 percentage points from the level registered in the FY 2021/22 largely reflecting the adverse weather conditions.
3. Banking sector remained strong
The report shows that Ugandan banking sector remained resilient despite weak economic growth prospects, heightened inflation, and elevated geopolitical tensions. Total banks’ assets grew by 8.4 percent from UGX 44.6 trillion as at end-June 2022 to UGX 48.3 trillion as at end-June 2023.
The report notes that the increase in banks’ assets was mainly attributed to holdings of government securities, which rose by 12.2 percent, amidst a slowdown in credit growth. Concerns about slowing economic growth induced greater caution in banks towards extending loans to the private sector. In this regard, commercial banks’ gross loans and advances increased by 4.7 percent from UGX 18.6 trillion in June 2022 to UGX 19.4 trillion in June 2023.
4. Foreign Exchange reserves declined
The report paints a dismal picture as far as the country’s foreign exchange reserves are concerned.
The level of foreign exchange reserves on 30 June 2023 was USD 4,074.63 million (4.15 months of import cover), a decrease of 0.37% from USD 4,089.88 million (4.17 months of import cover) as of 30 June 2022 and a decrease of 3.31% from USD 4,214.17 million (5.48 months of import cover) as of 30 June 2021. The report notes that the drop in the foreign reserves during the financial year was mainly on account of net outflows of foreign currency relating to government payments to meet external debt and import obligations.
5. Mobile Money transactions shoot up by 22.6%
The report shows that during the year ended 30 June 2023 mobile money transaction values significantly increased by 22.6% from UGX 156 trillion in June 2022 to UGX 191.3 trillion while the transaction volumes increased by 20.8% from 4.8 billion to 5.8 billion over the same period.
Similarly, the number of registered mobile money customers as at June 30 2023 stood at 42.9 million reflecting a 11.4% increase from 38.5 million in June 2022. The active customers (who transacted at least once in the preceding three months) increased by 16.3% from 22.7 million in June 2022 to 26.4 million in June 2023.
6. Complaints against mobile money increase
According to the report, a total of 433,258 complaints were received and handled by financial institutions supervised by the central bank between July 2022 and June 2023, a significant decline from 917,938 raised during FY 2021/22. The biggest number of complaints was in the Mobile Money / Mobile Banking category, accounting for 40.1% of complaints raised, followed by complaints about Loan Processing at 12.8%, Agent Banking at 9.8% and Debit Cards at 6.9%. There was a tremendous increase in Mobile Money / Mobile Banking complaints as compared to 29.3% for the period ending June 2022, partly explained by the rapid uptake of mobile money services promoted by financial inclusion campaigns amid increased fraud and network disruptions.
7. Petroleum Fund swells
As of July 1, 2022, the amount in the PF was USD 5.4 million for the dollar account and UGX 90.03 billion for the shilling account. During the year, there were inflows of USD 0.185 million and UGX 116.7 billion, with no appropriation of funds from the PF. Consequently, by 30 June 2023, the PF retained USD 5.6 million and UGX 206.7 billion.
8. Value of currency in circulation grew
The report notes that the value of Currency in Circulation (CIC) grew by UGX 487 billion (7.1 percent) from UGX 6.8 trillion recorded in FY 2021/22 to UGX 7.3 trillion in 2022/23. The net value of banknotes in circulation increased by UGX 477 billion from UGX 6.6 trillion in June 2022 to UGX 7.1 trillion in June 2023, while that of coins increased by UGX 9.9 billion. This was on account of increased demand for cash in response to increased economic activity.
9. Debit and Credit Card usage on the rise
According to the report debit card transaction values increased by 36.5% from UGX 1.26 trillion in the year ended June 2022 to UGX 1.72 trillion in 2023 while credit card transaction values significantly increased by 61.1% from UGX 66.4 billion to UGX 107 billion over the same period. A similar trend was noted for point -of-sale transactions whose transaction values increased by 28% from UGX 711.6 billion to UGX 910.4 billion over the same period.
10. BOU board members earn Shs 5 million per month & 2.5 million per sitting
On a lighter note, it is lucrative to sit on the Bank of Uganda board. The report notes that each of its non-Executive Directors (board members) is paid Shs 5 million per month as a retainer.
In addition, they earn Shs 2.5 million net per meeting as sitting allowance.