Kampala – The Bank of Uganda has, on Monday, April 6, directed Supervised Financial Institutions to suspend or postpone payments of all discretionary distributions such as dividends and bonus payments for at least 90 days.
In a Monetary Policy Statement issued by Governor Tumusiime Mutebile, cautioned financial institution to buffer capital while supporting the real economy urging the SFIs to suspend paying out dividends for at least 90 days effective March 2020.
This development was a manifestation of the April 2020 Monetary Policy Committee (MPC) meeting that sat today (Monday) sanctioning an update on the Ugandan economy amidst the COVID-19 pandemic.
The Monetary Policy Committee also sanctioned the reduction of the Central Bank Rate (CBR) by one percent to 8% economic turbulences that have registered a severe contraction in economic activity due to a combination of global supply chain disruptions, travel restrictions, measures to limit contact between persons, and the sudden decline in demand.
“Consumer-facing sectors have been severely affected by social distancing measures and heightened uncertainty, while the manufacturing sector has declined on account of disruptions to the inflow of raw materials,” read part of the statement.
The Central Bank continued to affirm its commitment to SFIs in extending quality liquidity assistance and purchasing treasury bonds from MDIs in t effort to stabilize the economy.
“Bank of Uganda will undertake to provide exceptional liquidity assistance to commercial banks that are in liquidity distress for a period of up to one year and reverse REPOs of up to 60 days at the CBR, with the opportunity to roll over,” Mutebile edified.
“Purchase Treasury Bonds held by Microfinance Deposit-taking Institutions (MDIs) and Credit Institutions (CIs) in order to ease their liquidity distress whenever it arises. MDIs and CIs that do not hold Treasury bills or bonds in their asset holdings will be provided with liquidity secured by their holdings of unencumbered Fixed Deposits or Placements with other SFIs,” part of the statement read.
Looming fear in COVID-19 has had severe ramification on Uganda’s external position with capital outflows causing adverse effects on international trade, workers’ remittances, FDI (Foreign Direct Investments) and loan distribution; aggravating exchange rate depreciation pressures.
“The Uganda shilling depreciated against the US dollar by 2.2 percent between February and March 2020,” the BoU Monetary Policy Committee disclosed