Uganda: Banks Project Rise in Loan Default Rates

Banks expect loan default rates to increase on the account of a volatile economic environment characterised by a weak shilling and rising inflationary pressures, according to the Bank Lending Survey Report released last week. According to the 2017/18 fourth quarter report compiled by Bank of Uganda, businesses that hold dollar denominated loans are likely to default because of persistent depreciation of the shilling against the dollar, AllAfrica reported. The shilling has depreciated by more than 7 per cent since the beginning of the year and is projected to weaken further. Market experts have projected that the unit might hit the Shs4,000 mark before the end of the year. The shilling last week maintained relative stability at a range bound of Shs3,824-3,840. "The expected increase in default rate on loans is mainly attributed to the likely impact of the depreciation of the shilling against the dollar particularly from [businesses] that borrowed in foreign currency," the report reads in part. Read more.