This money grew as Uganda descended into lockdown. In February 2020, Ugandans held just Shs 8 trillion in savings in banks. Since then, they have added half a trillion on their accounts. This is despite the fact that hundreds of people lost their jobs in the last three months due to slow business as a result of coronavirus lockdown.
Paul Lakuma, a research fellow at the Makerere University-based Economic Policy Research Centre (EPRC), a think tank, said it shows Ugandans are becoming more rational and responsive to macro-economic news.
From March through May, he said, “it was so uncertain that no one knew what would happen or when people would get out of lockdown. People decided to put their money in banks to earn interest.”
Also, another figure to look at is the money Ugandans are holding as private demand deposits. This is where a person puts money in the bank but can walk in anytime and withdraw it. This money, according to Bank of Uganda, increased from Shs 6.9 trillion in March to Shs 7.2 trillion in May 2020. This money doesn’t often earn interest. This brings the total amount of money Ugandans have stashed away in banks to Shs 15.7 trillion.
Closure of social activities including festivals, concerts, and other social places like bars where people spend daily means they either put the money under their beds or in banks.
Lakuma said that things like a disruption in transport, closure of shops that sell durable goods meant people were unable to spend. In April and May, only shops selling food and supermarkets remained open.
Banks are expected to lend much of this money instead of stashing into their vaults. Wilbrod Owor, the executive director of Uganda Bankers Association (UBA) told reporters last week that banks only managed to lend Shs 1.1 trillion in April 2020.
The low lending is due to increased, business uncertainty and the fact that fewer businesses and individuals are applying for loans. The amount being saved on bank accounts is more than what Ugandans saved in the 1990s, said Dr Adam Mugume, the executive director for research at the BOU, in a recent interview.
Mugume said that in the 1990s, Ugandans held more currency and few were willing to put it on the accounts in the banks for a long time because they feared a bank could collapse with their money. This fear has majorly waned.
