Senior presidential advisor on finance and planning Dr. Ezra Suruma has downplayed claims that the economy is melting down due to recent developments in the banking sector.
Prof Suruma says like any other business, banks also face challenges and this is not unique to Uganda.
He however says government cannot allow a bank to fail with people’s savings and he explains the intervention of the central bank.
Recent GDP data show that Uganda’s economy continued to grow in Q2, albeit at a moderate pace. A breakdown by sectors points to the service sector as the main driver of growth. Industry also expanded in Q2, supported by manufacturing, while the agricultural sector contracted as poor food crops took a toll on production. In late September, the World Bank announced that it will withhold new lending to Uganda while it reviews the progress made in the projects which it is already funding in the country. The issues under examination include poor fund absorption and weaknesses in project execution and monitoring.
Dr Suruma’s remarks follow fears raised over the state of the country’s economy after the central bank took over management of Crane Bank last week.
The financial distress that Crane Bank finds itself in, Mutebile said was, in part a result of bad and doubtful loans that could have negatively impacted the bank’s bottom-line.
The Central Bank blamed this on the bank’s top management and the board that were immediately suspended to pave way for an investigation into the alleged mismanagement.
Early this year, Sudhir Ruparelia, Crane Bank’s majority shareholder alluded to the worrying state of the economy, which he said would be a hard knock on the country’s performance indicators.