Global geopolitical conflicts, even those occurring far from a nation's borders, can significantly impact domestic economies through interconnected transmission channels such as energy price shocks, trade disruptions, financial market volatility, and remittance flows. Countries with high import dependency, limited fiscal space, and structural economic vulnerabilities face amplified risks, while those with strong macroeconomic fundamentals, diversified economies, and robust policy frameworks can better cushion these external shocks. Effective economic resilience requires proactive policy measures including credit reallocation toward productive sectors, social protection systems, and structural transformation toward industrialization.
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system. Then control UD At Uganda Development Bank, we are committed to empowering communities by supporting projects that unlock excellent economic benefits for Ugandans through job creation, tax contribution, output value, and for rain exchange. We seek partnerships with projects that drive economic development in Uganda.
AA farm systems is a mixed dam.
We stand on four pillars. We have diary, we have agriculture, we have skiing and lastly we have private extension services.
We supply bulls, pure afs all over Uganda.
And uh in addition to that, we are a certified skilling center, DIT certified. So people come here for skills and we teach them. Then we also add value to our milk that we get from these cows. We add value and we make yogurt which we sell at our farm duka in the trading center.
UDB is our very good partner. It has helped us put up this cow ban.
This is essentially UDB money which will be used for this and it's a shelter that we we shall stock with 40 cows and that will make us realize our mediumterm strategic plan goal of having 60 animals under the ship because we wouldn't be able to put up that ship if it wasn't for As a farm system, Uganda Development Bank, inspiring development. At At Uganda Development Bank, we are committed to empowering communities by supporting projects that unlock excellent economic benefits for Ugandans through job creation, tax contribution, output value, and for rain exchange. We seek partnerships with projects that drive economic development in Uganda.
Uh 5K was started in 2012 with our few savings uh with a capacity of 1,000 BS and now we have a capacity of 10,000 BS as it is called mixed farm faith care deals in zero grazing cows and we grow seasonal crops not even forgetting coffee but the main project or enterprise is Pre is the mother of everything.
uh we have been facing many challenges but but the most uh challenging part was during COVID COVID hit us very seriously and that's when I met my savior UDB but after getting UDB money with low interest of it we are able to go back to the track and here we are actually we are even expanding we have a capacity laying bags of 10,000 and we are constructing houses because we got the money actually with neutral interest with a gross period. So we are able to brood our birds start laying and we started paying and we are paying very well. I think we are good customer at Uganda Development Bank. We are committed to empowering communities by supporting projects that unlock excellent economic benefits for Ugandans through job creation, tax contribution, output value and foreign exchange. We seek partnerships with projects that drive economic development in Uganda.
Vocational uh education does more of equipping of different skills in different skills ranging from hairdressing, tailoring, catering and so on. So those are basically the courses that we do and we do them in different levels.
Uh my relationship with UDB came through yoga privy. I'm registered with private institutions association. So one time we invited for meeting as properators of schools and UDB sold in their idea of offering loans for some of us who are still developing. So Ry happened to be one of those that is not yet fully established. Of course being a private institution we didn't have enough structures. So I applied for a loan and that is how our relationship started and yeah so I got the first installment putting up the preliminaries and the substructure and the structure is is being worked on.
I really want to thank UDB so much because the interest is pretty low and uh I must say thank you so much UDB for supporting vocational education.
Where does it come from? That thing that makes us Ugandan. That thing that makes us different from everybody else. Where does it grow infinitely? Some say it's in our history, in our culture, and in our hearts, in our warm smiles, and vast miles of coffee, dairy farmland, and amazing maze fields. It's in our inherent pursuit to always be better. To never stop growing and glowing. So you see, so you see, we are more than just a waving flag. We are a nation of sweat and skills, a nation of ideas and inventions. But what truly makes us Ugandan is our quest to improve the quality of life for Ugandans by creating sustainable jobs, businesses, and improving household incomes. That's what makes us Uganda Development Bank.
Uganda Development Bank, inspiring development.
At Uganda Development Bank, we are committed to empowering communities by supporting projects that unlock excellent economic benefits for Ugandans through job creation, tax contribution, output value, and for rain exchange. We seek partnerships with projects that drive economic development in Uganda.
Private Uganda system.
forgotten At Uganda Development Bank, we are committed to empowering communities by supporting projects that unlock excellent economic benefits for Ugandans through job creation, tax contribution, output value, and for exchange. We seek partnerships with projects that drive economic development in Uganda.
Wars are not fought only on the battlefields. They are fought in the prices of beans, beef, and bread. In the cost of a border border ride, and in the margin between a small business surviving or closing its doors. The conflict that erupted on the 28th of February 2026 when the United States, Israel, and their joint operations were launched against Iran may be geographically distant from Campala, but its economic shock waves have crossed every ocean, every border and every supply chain on their way to a beautiful country. Take for example Brent crude oil which was an average $67 a barrel in about 2025. It's now surged past $13 and we're talking about March 2026 alone.
Look at another example and many others like those that we have mentioned. Look at diesel. The diesel that you take. Look at the Ugandan shilling. has shed some 4.5% of its value in a single month. Taking you back to fuel, diesel has scraped past the 5,000 Uganda shillings per liter mark.
And behind each of these numbers, I must say, is a Ugandan farmer, a manufacturer, and a father calculating whether he can afford Porsche for his children who are now at home on holidays and later fees for the next term. That's before we talk about rent. Welcome to this inaugural webinar on matters economy from the Uganda Development Bank. Here we shall make a positive attempt at making many things make sense about global conflict in general and the USIsraeli Iran war in particular.
Uganda Development Bank's April 2026 policy brief identifies four transmission channels through which this conflict reaches our economy. Number one, the energy prices. Number two, trade and shipping disruptions. Number three, financial markets and capital flows. And of course, the last one being remittances. Today we are privileged to have two of East Africa's most rigorous economic minds coming down on us to help make sense or should I say decode what these channels mean in practice for policy and for the millions of Ugandans like you and I who may never watch the news from Thran but will feel its economic consequences every time we feel a tank or buy a fruit from our local markets. I now invite our distinguished guests to help us make sense of this very distant fire but with a real heat burning behind us. But before that first introductions from Washington DC a development economist based at the World Bank Dr. Joseph Maj welcome to this webinar Joseph. How are you doing? How is Washington?
>> Thank you very much. Uh good morning uh to me good afternoon to you. I'm excited to be here. I look forward to the conversation. If this should make you feel better, it's scorching hot in Kala, averaging around 28° C this afternoon.
And boy oh boy, how beautiful the city looks from my vantage point.
>> It's a rainy morning in in DC and it's pretty warm.
>> Well, let me turn to the man that is hosting us here at his premises live from the UDB head office in Kala.
Yes, Dr. Francis Mes, welcome to the webinar.
>> Thank you. Thank you, Simon. I should be the one who you should be the one welcoming me but see me welcoming it >> and thanks thanks for hosting this >> absolutely >> yeah you're hosting you but you're you're real managing it and pleasure to have you here >> thank you >> and good morning Joseph >> well uh Francis here just preempted my name is Casiate Simon Casiate no economist no doctor but a guy who's going to sit and personify you who's watching us and listening to us from wherever it is that you're catching this webinar on what this situation global as it is has in as far as an impact is concerned to your pocket your livelihood and maybe to a greater extent the economic development of our beautiful country now gentlemen I'll start with you who's right next to me you I want you to help me set the context right all right >> you know the war in the Middle East thousands of miles away from here but here we discussing its impact on Uganda.
Help me understand this. Basically, if I turn to MJ, who looks at things from an ego's eye view, after all, he's in Washington.
>> Thank you. Thank you, Simon. Uh what it's clear that uh the war doesn't just move armies.
>> It also moves markets. It moves markets for raw materials, product markets, >> financial markets. And so it can have it can have far significant implications or farreaching implications to ordinary people that are far away from the conflict. And so while this war uh is very uh far from the Ugandan perspective in the Middle East, its implications especially if you live uh in interconnect in an interconnected and interdependent world, whatever happens in one part of the count of of of the world significantly can uh affects the other parts too. So the war to contextualize it and you've already spoken to the four um transmission mechanisms through which uh this war uh is affecting Uganda uh and you spoke to energy prices and briefly I know we probably will delve into the details of this uh but briefly uh this war has significantly sparked an increase uh in energy prices >> you're telling us where you see it at the pump price >> for Uganda yes and right so the pump prices uh fuel prices have significant significantly increased.
>> Uh it's disproportionately affecting different especially it's disproportionately affecting um areas.
Uh in greater campaign metropolitan where we are it's profound but it's not not as bad as it is in rural areas. Uh about a week ago I happen to have uh moved to some parts of the country southwestern Uganda and western. Uh in rural areas there's rationing. You go to pump stations and they there's no fuel >> or they tell you yes you have money for a full tank but you can only take half a tank.
>> Exactly. Quickly let's turn to uh Joseph in Washington just to give us you know the global context how this is affecting global economic development. We see it at a micro level in Uganda affecting supply chains, affecting prices at very consumer uh levels. But where you see it and yes, he may be best at the World Bank, but I must also set the context and put the disclaimer that Joseph's views are not views of his employer, the World Bank Group. They are his views in his own capacity as a development economist, a Ugandan who is glad to be a part of this conversation. Back to you, Joseph.
Uh thank you so much Simon. I I think that we need to step back a little bit and reflect um in a kind of global context how large is this shock and why should we care and why should it have the kind of ramifications that Francis here has spoken about. Now to give you a sense of the sheer size of the disruption, consider the fact that the Middle East accounts for about 30% of total oil production, 17% of global natural gas production, and about 15% of investment in global oil and and gas.
Now, to give you a sense of what this means, consider the following. 50% of the world's seaborn trade in sulfa passes through the straight of homos. So does 34% of trade in oil, 9% of liquefied petroleum gas, 19% of liqufied natural gas and about 20% of refined oil products, 13% of chemicals, including fertilizers and nearly 10% of metals such as aluminum. So the state of Homus Simon is a choke point of the world economy and therefore the interruption of most commodity exports from the G region represent a historic shock to energy markets but also fertilizer markets. Now consider this the loss of oil supply caused by the effective closure of the straight of was the largest disruption on record.
The initial supply losses are greater than past disruptions due for instance to the Iranian revolution. If you might remember the Arab oil embgo, you might remember the invasion of Kuwait.
>> Yes.
>> The Iran Iraq war, >> the Iraq war, all the civil war in Libya.
So Simon, as a consequence, these disruptions have had shock waves that have reverberated across the world with supplies of energy and other commodities affected and leading to substantial increases in commodity prices such as those that Francis has spoken about.
Mhm.
>> Let me stop here but I wanted to frame this in a kind of global context so we can understand the kind of shock uh that we are dealing with and why the world is you know the way it is right now thinking about all the possible scenarios that could pan out if this is prolonged.
>> Well clearly Joseph you sound very much doomsday and blame you because that's the reality as you know it and that's the reality as it is. But turning down to Francis here and hopping on to what Joseph just did conclude with the exponential rise in fuel prices and you had almost started hitting about it you know in greater detail but I may want to know from you as a development economist based here at the Uganda Development Bank >> when you analyze the impact of increased pump prices of fuel >> which sectors are most hit cuz one may want to imagine it's just the transport sector but looks like there's a cascading effect on many other sectors and would love to know from your end which are these sectors.
>> That's true Simon. So again to further contextualize it, Uganda is um uh import dependent when it comes to petroleum products. We import 100% of refined uh petroleum products.
>> Okay. Not for long they say first oil is about to come out of the ground.
>> Of course, as we wait for the first drop, which will uh probably soon come, uh we are anticipating and excited about that. uh but now that we still purely depend on imports and about and Joseph provides the global context but for Uganda 50% of our oil of of of fuel comes from this passes through the straight of of Hamos and so that shows you the significant impact that we see of course when it comes here there are quite a number of transmission mechanisms through which this increase in oil prices affects Ugandans affects different sectors and affects different segments uh of the community. But to be specific, there's a direct mechanism that when it comes, you see a direct hit on uh transport, logistics and distribution uh costs. Now that of course increases the transport fairs, but it also has significant implications on the manufacturing sector on the production. Now on the from the production point of view, energy is a key component is an key input uh into uh the production processes. So when you have the price of fuel increases, let's look to let's look atmemes and small businesses. If you have a meal, you do maze milling in a rural area.
>> Most of the mainly they where there's no electricity connection, you're probably relying on either fuel powered generators to do that. If you have a milk cooler in a rural area, you're using fuel largely. very few are currently using solar in Uganda and so they would be using fuel powered again engines to cool and to chill these produce. So when the fuel increases it is eating into the profit margins of these businesses and basically what we see is the increase in cost of production which for those that survive and continue proc producing they pass on this cost consumers and that's why in the end you would see an increase in cost of living. So basically prices of produce are increasing are hitting the poorest of the poor. There's research research has shown that for poor households about 65% of their income goes for food is spent on food on consumption. So when you have these prices increase ultimately you're going to have many slide into poverty. Uganda had made gains gains between uh 2020 and 2024. We had the proportion of the population under poverty line reduced from 20 uh 3% to about 16.1%.
>> Which is a good gain. Uh but multi-dimensionally we are still poor.
We have about 27% of the population below the multi multi-dimensionally poor. That's when you look at education at health incomes and so forth. So when such shocks hit and you see uh the prices of oil increase that feed into very many other processes uh there's a likelihood that also you could see poverty increasing you could see both multi-dimensional but also income poverty which is not good for the country definitely >> as I try to get to terms with the heavy words of Dr. Francis here telling me about multi-dimensional poverty. For me, I know poverty as poverty, not having money in my pocket. Whichever dimension, I'm sure as we go with the conversation, I will pretty much appreciate what he means by dimensional poverty. But I'll turn to you uh Joseph in Washington and just try to pick from your experience in crossborder research on how such uh global phenomena affect or put many politics in a vulnerable situation.
We've had similar shocks in the past. I mean, we saw Russia Ukrainian war coming out in 2022. We saw the, you know, COVID 19 disruptions of 2020. One would want to know from where you sit. Uh, you know, particularly what are some of those um uh where are those areas you believe Uganda is most vulnerable in regard to this particular conflict unlike any other in the past? Is it only in the energy situation?
>> Uh this is a great question Simon and uh before I answer this question I would like to circle back a little bit on uh the earlier discussion and provide our listeners with a sense of how the shock is uh disrupting uh global economic developments and then how that links to what we see uh in Uganda because I feel that that linkage um is extreme extremely important. Now I think Simon that it's worth to note that before the outbreak of the war the global economy seemed to be on very firm footing and it was supported by better than trade dynamics but also as you know uh improvements or investments in artificial intelligence and this has propped up uh global growth developments in the recent past. But the onset of the conflict however has kind of reversed these gains and now estimates show that the global economy will grow by 0.2 percentage points less than what was anticipated before the start of the war.
For emerging markets, I mean countries that are not advanced economies, the heat may even be bigger, downgraded by about 0.4 percentage points. Now you may wonder what this means for Uganda but I'm going to come to that later. For countries closer to us for instance uh in South Africa twoirds of them that's about 31 out of 48 countries have seen their growth forecast for 2026 uh downgraded again reflecting the recent developments. Countries are now seeing elevated inflationary pressures and prices of fertilizer are increasing.
There are estimates that an additional 30 million people in South Africa could face acute hunger if this is not resolved on time. Of course uh there are differences in how countries are you know affected and this depends uh on their exposure and ex existing vulnerabilities but as well as you know presence of policy space to take action to cushion the impacts uh of the war and fence has spoken about you know some of the the channels I don't want to repeat those but I wanted to mention uh 102 in addition to what he said uh you know there is tourism and commerce as GCC countries have established themselves as global tourist uh commerce and aviation hubs uh that's very important uh for Uganda but there's also the investment channel as these have been significant sources of investment both in the finance but also other sectors including energy agro tourism and so on and so forth. Wow.
>> But you did ask a question, Simon, on how vulnerable Uganda is. And the first one uh is exposure. How exposed are we?
Francis has already hinted that about 50% of our oil supply comes through the you know straight of hormones >> and that is extremely extremely direct exposure to the disruptions uh in this area. But of course dynamics are changing very fast and we shall speak to this later because very soon Uganda will become a net exporter of oil. But again we know that oil the price is determined in international markets and therefore as we get more we may import at a higher price.
The second one, Simon, is our dependence on agriculture as an economy. And when prices of fertilizer go up in an environment where agriculture sector is also accepting it, we are likely to see challenges in this area that may lead to reduced adoption of these technologies.
We are struggling to get people to use fertilizer. Agriculture yield is reducing and productivity is going down.
And this may have implications for household food security, incomes, and agricultural export competitiveness.
But when you come to vulnerability, which kind of points to preexisting macroeconomic conditions that could cushion or intensify the effects of these shocks, you did mention Simon at the start that I was all doomed, but I would like to say that Uganda approached the crisis in a pretty good shape. At least at the macro level, >> growth was picking up, inflation was low and external reserves were improving.
The kind of things that should give us a cushion when we need it. Now when the conflict is prolonged, you could exhaust your buffers.
However, we have a large informal sector and a large percentage of vulnerable people who work in subsistance agriculture.
But this also speaks Simon to the vulnerability of Uganda's growth model.
Right? So we can talk about high growth.
But we have seen growth that doesn't result into meaningful poverty reduction. This is a puzzle that we have to solve. We have seen growth that hasn't resulted into jobs especially for the youth. This is another puzzle that we need to think about. At the same time and I know Francis may want to speak to this later because he also looks at these things. We have a private sector that lacks dynamism.
Most businesses die young.
Those that don't die, meaning those that survive don't scale. And those that scale don't fly. And by fly I mean few Ugandan business enterprises go a step further to become regional or international brands. Now these challenges Simon are missed opportunities >> their founding parents.
>> Yes. So these challenges are missed opportunities Simon for building solid foundations necessary to enhance resilience in the face of cyclical shocks like the one uh that we are dealing with now. Now the last one is policy space. Does Uganda have the space to respond to these kind of challenges?
Now I can think of two spaces.
You can think of space in the monetary circles and in the fiscal circles. Now on the monetary which is the pview of the bank of Uganda, I think that we have been doing well for the reasons that I mentioned before. Inflation has been low for a long time. Below target growth has been improving.
Purchase managers indices which give you a sense in real time of how the economy is performing have been in expansionary territory for more than a year month on month straight. That's true. And Uganda is one of the countries which I think will soon become a lower middle income country. There are two others that I think are going to achieve that over the next two to five years. Rwanda and Ethiopia. So we have approached we have approached the crisis at the macro level in that sense in very good shape.
But I think that it's on the fiscal side where things are a bit wobbly for the following reasons. Mhm.
>> When you have such a shock, you want to be able to provide what I'm going to call fiscal support kind of extra expenditure that can cushion households or tax breaks or deferrals that can help you, you know, get over the shock and then you normalize later.
>> But Uganda collects low calling it a subsidy.
uh not exactly subsidy because subsidy is is something quite different. This kind of gives you what we call a counteryclical measure a kind of rainy day back that you you know something that you can use on a rainy day and move on and go back to normal. Subsidies are kind of permanent measures that are very difficult to you know to scale back once put in place. That's that's kind of and they tend to be kind of you know product specific and so on and so forth.
>> I hear you. But Uganda is collecting low revenue, this is the truth, as a percentage of GDP. So the resource envelope relative to the size of the economy is so small.
In addition, a large portion of that envelope that is already small is spent on servicing debt. Interest payments now consume more than 20% of revenue in total debt service and amotization.
Amotization is like the principle you pay back which is not just interest.
When you add the two about 50% goes to paying back your debt.
>> The envelope is already small. What is left and what can you do with this? And this is squeezing out the much needed through poor spending including on social protection that would protect that would protect the poorest people.
So this is as far as I can answer and put on the table the discussion on you know how I see things for myself.
>> Thank you very much Joseph for that deep insight and while I thought I was running away from more complex economic terms from Francis here I run to you and you just have sent me back same momentum. Now, let me pepper down this conversation to look at an average every day one of the 12 million people that you talked about that are face to face with multi-dimensional poverty. Many of these families and I can just give you an ocular example are those whose incomes at household level rely per month on a Western Union remittance for a mobile money uh sent message from someone working in the Middle East. We know that now that is facing an existential threat that well the jobs are not as lucrative as they were and in fact for some there's a fear of repatriation of you know sending them back home because what they were working on has been heavily disrupted by this war >> and these have been the lifelines of their Keith and Kin back at home. What in your view will happen to those of us in Uganda whose monthly expectation has been that remittance from >> a relative, a son, a daughter working in the Middle East whose job now has >> Yeah, good question, Simon. Um, before I answer that, I just wanted to circle back a little bit u what Joseph has submitted. uh speaking of transmission mechanisms, he talked about fertizers and it reminded me of uh one of the sectors that has been struggling in Uganda but contextualize it uh Uganda's about 30% of wild fertizers come from the Gulf.
>> For Uganda it's about 20% but specifically from Saudi Arabia and Qatar uh we get mainly ura it's an ingredient into fertizers from Qatar. Uh and so when such an a war or a shock happens, one of the key concerns is the raising cost of fert accessing fertanda.
The level of utilization of productivity enhancing imports like fertizers is still very low. Uh so the sector I was speaking about is tea. Uh when the Russia Ukraine war broke out, uh one of the key sectors that were hit is the T sub sector. It's been struggling and of course the key channels has been uh low aggregate demand so affecting the exportation of tea but also the access to fertilizers. It highly depends or its productivity depends on fertilizers. So now as it recovers you get another heat another another shock. So it's also one as as he rightly put it. one of the key key transmission mechanism that is real affecting our farmers the agriculture sector production and productive and linked to the bottom of the pyramid that you're asking about. Now coming to remittances remittances remain key sources of ex of forex for Uganda.
>> Yes, >> they have two broadly uh two um you know impacts if I might say there's a macro one and the micro one. The macro one is the forex helping us to stabilize our currency helping us because these are forex inflows from where we started I mentioned that Uganda is trade dependent we are net importance so you really spend more of forex than you you get it you bring it in so if you remittances do caution last year alone in 2025 Uganda had about$1.6 6 billion US in remittances >> coming to the country very significant and so where you have your net um >> importer that helps it cushions you stabilizes your currency but also enhances your reserves but let's go to the micro side of it and especially Middle East uh Middle East is the key uh recipient is the key destination of our externalization of our labor externalization of labor uh statistics show that we have about 300,000 Ugandans in Middle East. Uh >> those are those we can account for properly through the >> those are the ones we can account for but north of 60% of these are women. Alo interesting.
>> Wow.
>> So we find many women in Middle East.
Again the bigger proportion are youth.
So you have youth that are employed and now that also speaks the youth employment challenge we have in the country.
>> The one that you talked about that there's Joseph I think talked about growth that's not creating jobs for young people. growth that is not you know helping businesses survive past their fifth birthday and things of that nature.
>> Exactly. So when you have your youth uh women uh but again when you look at if you were to profile all these workers abroad you might find that relatively less skilled and what does that mean?
Those are the ones that directly send back their money to feed their households.
>> Absolutely. So when such a shock happens in the Middle East definitely it's it's affecting production potential of this sub region.
>> So which means it affects the job creation potential in the sub region and that means that they will not bring on more workers from Uganda and other parts of the world that they than they've been bringing and that significantly affects now the incomes uh the remittances from that region. What does it mean to the the household that has been relying on that? Of course, where we started, we talked about poverty thresholds and the risk the likelihood of rever of reversing the gains that we have achieved so far. So, probably those are vulnerable households. Those are the households that will not afford to take their children to school that will not afford to seek for uh you know reasonable health uh services, but also that will probably change their consumption patterns and we probably will go to one meal a day than three meals a day. And so this uh effect the the heat the political tension that we see and the conflict in the Middle East has farreaching implications and disproportionately affecting uh relatively poorer households and segments of society.
>> I turn back to you Joseph. You did mention earlier on on how well the Bank of Uganda was doing at that level where you know they're managing inflation and the monetary policy is at a good standpoint. One would want to know um what in your view uh could the bank of Uganda do at this particular time when we see a 4.5% slip of the Uganda shielding just one month what can they do in terms of you know defending the exchange rate without necessarily having to strangle domestic credit and then of course private uh sector investment what can they do to ensure that this runaway shilling can be defended in such a manner that still some work on news to be done in the private sector and also of course uh ensure that there's some uh good borrowing without increasing the central banking rate.
>> You are right uh Simon and I think that of Uganda one of the institutions that has you know try to do their mandate pretty well as far as price and exchange rate stability is concerned. Now you could look back over the past year Simon and you can see that the exchange rate has been stable. In fact, until recently the Uganda shielding has been gaining value against major currencies across the board until recently and the country has been accumulating reserves which provide very important buffers and can be used to stabilize foreign exchange markets uh when needed. Of course, the latest developments uh will complicate this very good story for our colleagues at the Bank of Uganda. But you have to remember that the price shock that we have constitutes in economics what we call a price you know a supply shock if you like and it will have to be seen how this feeds into core inflation. Coin inflation is that inflation that is not you know volatile that strips out things like agriculture and energy commodities and so on and so forth. Now if that happens very quickly unfortunately the bank of Uganda may have to raise interest rates like you you know you so rightly pointed out to stabilize uh macroeconomic conditions. Um unfortunately this is a price that has to be paid for the conduct of monetary policy. But here is the thing. Higher interest rates may have implications for the supply of credit to the private sector as loans become more expensive.
But also higher interest rates mean that banks may find it more lucrative to lend to government than to the private sector. In which case government borrowing crowds out, you know, credit that would have otherwise gone uh to the private sector. And you may have noticed this scenario before. The composition of Uganda's debt is changing and domestic debt meaning government borrowing domestically is playing a more prominent role. The question then uh and this is a very important question for me is who is being squeezed out.
You need to look at the composition of bank lending to the private sector. I think the largest shares are real estate services, personal services and trade.
In my view, the sectors lack the dynamism and productivity that is necessary to drive gains in transformation.
In other words, we need to correct the distortions in credit markets such that the allocation of credit and we have to think about this seriously goes to sectors that have large potential for growth and job creation. I think this is a key issue Simon that needs to be discussed. How do we ensure that credit goes where it should go to create the value that we want to see?
And I think you set the stage very right for my next question to Dr. Moj here who works at well the Uganda Development Bank. It's one of those credit offering institutions and as you know it of course like he just said there's no uh prices for knowing that inflation has now is going haywire as a result of this. We are seeing that in fuel, food and transport. You just mentioned that and one wants to appreciate the fact that of course Uganda's fiscal space is already constrained by significant debt servicing obligations. Again, one of you did mention that how much of you know about 50% of our >> of our income as a country is going into servicing not even the real debt but the interest on the debt. So one wants to find out directly from you >> what's the feel like here at UDB as one of those you know as part of the financial sector um you know the implications of your business with lending money to people that now don't even have the appetite to borrow or those to whom you don't even have the appetite to lend because so many things are going wrong on there including those beyond their control like inflation.
>> Tell us what is it like in here? Yeah, it's quite uh a tight um and and again I will refer to the previous shots that we have seen uh we have had in the past 5 years uh from COVID 19, the Russia Ukraine war uh and so forth. Um what we've seen when such um uh crisis happen uh immediately there is a hold back on ODA so the cheap official development assistance sorry um where the cheap sources of money kind of shrink >> and so the government finds itself in a tight corner >> but two even the concessional uh borrowing by our government where they would look at external borrowing and targeting uh external markets it also that space shrinks >> true >> because one as Joseph has indicated one you'll find that um the other central banks are doing the same they're increasing uh their policy rates to t inflation uh and there's what we call sofra the benchmark uh rate that we use to gauge um the the the prices of credit uh in international markets so that number or that rate increases significantly Now if government borrows externally it would still come expensively. As an alternative if it chooses to borrow domestically exactly what Joseph has talked about you crowd out private sector credit. So government finds itself in a tight corner in such circumstances where globalation is rising as it definitely is being triggered by this very war that spaces outside fiscal spaces shrink. you can't get money if you borrow domestically. You you're in a tight corner. You crowd out private sector credit. But for banks, that effect is even real beyond the the high costs of credit >> uh or of borrowing even from external markets. For institutions that do uh get money externally, there are costs that we see in the market. When costs of production increase, your portfolio quality suffers.
uh so the businesses we've talked about different transmission mechanisms if the cost of production and the business environment is hostile uh one the businesses start struggling to pay back their loans and so we have again those benchmarks like uh NPL thresholds for commercial banks 5% that's when you see banks now tending or increasing towards that threshold now what does that trigger that the financial market or banks start holding back on risky uh sectors.
>> Yes.
>> That you so sectors like agriculture for instance risky anyway because you don't hedge against bad weather especially place like this where we don't where we depend on God blessing us with the rain or not.
>> Exactly. But you see if you have uh relatively cheap money >> you can you can take that risk you can put your money but the risk premium so you really have a small leeway to to intervene in risky uh sectors and so that's when you see now uh credit if it doesn't go to government securities which are definitely risk-f free uh to a large extent you hold back on lending to these risky uh area uh sectors >> risky areas and then of course that affects production. It affects basically uh everything that we've talked about and so that is one uh uh uh key risk. Uh but then for national development banks you've asked about the instruments that we can roll out. Uh and Joseph earlier on talked about this uh counter cyclical role uh of of government but also of DFIs of national development banks like UDB. That's when we come in and of course other banks would come in to do restructures because the businesses are struggling. you'd have to consider making it easy for them. That's when you reconsider their payment terms. That's when you change the teners. That's when you do all that restructuring so that businesses remain operating. But beyond that and institutions like UDB uh the instruments that we do roll out one is the number one that we've already ruled out our cost of credit is half market rate about 12%. So that's actually when we see the demand for credit from UDB significantly uh increases. We saw that during we saw that after the Russia Ukraine war. We are likely to see it even now that when conditions are tight elsewhere when the cost of credit is increasing in the market now we become that cushion to go to cushion and we would likely see an increase in applications and businesses reaching out for support. And then of course the advantage is you do relative uh cheaper uh credit but also uh patient longer uh terms and that's what we do.
The other instrument we've always or intervention we've rolled out in the past that has worked is where we partner uh with other institutions. The previous one we had during COVID was a partnership with EU European Union. uh they brought in a grant, we blended it uh with our debt, significantly brought down the cost of credit to aid the recovery of the tourism sector which was the most affected then. And so even in such times when times change, conditions are tight, we look at potential interventions like that to cushion to support the recovery of the private sector.
>> Wow.
>> Yeah, that's very interesting conversations and I know that I know a huge demographic of people who are listening to us. I have a bunch listening in from academic institutions and they are following this like their life depends on it because what we discuss on this webinar today will form a significant part of the arguments they are making in lecture rooms but also I know folks who work in government institutions at policy level the ministry of finance at the central bank who are listening in and keenly following your conversations and postings you and Joseph and you know making it you know a a point of reference but I also know ordinary folk like my sister Florence in London, my brother Ivan in Qatar and several others in here and you can see how triangulated their locations that you won't believe how affected one person in London is, another one in Kata in the center of the action is equally affected and of course we who I may not mean to say that we also receive remittances from them have since give them a break and we are suffering locally as we would say. So it's a huge you know should I say spaghetti connection of effect caused by one global phenomena but I'll get back to you now Joseph and look at uh let me expand the scope of our conversation away from just Uganda and look at the East African region. Now we know that of course East Africa is an economically integrated region and yet the policy brief suggests this policy brief of the Uganda Development Bank really does suggest that East Africa's shared structural characteristics like you know fuel importation dependency and shallow financial markets may amplify rather than cushion this shock. I saw it in your your report. I I will be asking you to supplement him because it was your report. But let me start with Joseph has got a global perspective to tell us what whether or not you believe that there's a compelling case for a coordinated East African policy response and whether you know of any existing such regional frameworks that would in fact cushion such a situation from a regional perspective as opposed to amplify the impact of this phenomena.
So Simon this is an excellent question and I think that one uh that warrants careful consideration. Um you see Uganda is part of the East African community and the ESC has you know a number of protocols including on the establishment of the customs union uh the common market uh the monetary union, a protocol on peace and security um protocol on foreign policy coordination uh and so on and so forth. And now you might or might not remember but in 2015 Uganda came up with a policy uh on the ESC integration and this policy identifies um a number uh of priority areas among which is the opportunity to develop a regional approach to energy infrastructure. So it does exist uh on paper and it's a very good opportunity to think regional in terms of our instru infrastructure uh but also including energy.
Now we might want to reflect that since this policy was adopted the ground has shifted a little bit and you could say in my view shifted for good uh in a number of ways that makes progress on these areas even more urgent. The first one is that more countries have joined the ESC. So we now have the DRC and Somalia as part of the you know ESC. Two is that we have had significant new discoveries of oil and gas resources in Kenya and Tanzania respectively. So these developments make it even more important to think regional in terms of infrastructure development and especially infrastructure uh for energy and the kind of discussion that we are having right now.
>> Think the moment how much power the region would have if we put our efforts together, worked together more closely with a sense of purpose and urgency. But as usually happens, progress has been slow.
Simon, we only have to construct these excellent policies and visions which look excellent on paper but implementation is often lacking.
>> And one would want to quickly ask really an adjoining question in your view. What do you where do you think we lose the grip? How do we have incredibly beautiful and seemingly practical uh interventions on paper and yet when the rubber hits the road nothing seems to be done? Is there no political will? Is there no competence among us? the technocrats, you guys are exceptionally competent. So are we on this other side that's not economic? So where do we lose the ball from in your view?
>> In my view, I I think that sometimes the politics of the day gets into the way and like you said, yes, the political will the political will to do that because it takes a lot of work uh to get these things done. Now my sense is that sometimes politicians work on shorter you know time horizons and some of these things take you know so long uh to pull off. So we need a more longer term kind of perspective on how we plan things and it's not just about energy infrastructure it's it's about pretty much everything. Uganda is known for having you know great plans on paper but implementation is always you know weak but also you can talk about uh you know capabilities in our public institutions so that's also something that we may have to look at >> interesting and I'll turn back to you Francis here again I'll make a good reference to your policment for April 2026 where you did advocate for the strengthening of domestic production and import substitution in others You're telling us that you know Uganda should grow and process a lot more of what we use here so that we stop being dependent on importation of maze pasta fuel and all sorts of things.
>> But we've seen these kind of interventions done before import substitution interventions being carried out by government but with mixed results. What makes you think your prescription this time round is going to give us a better result than what we've seen previously when we've been hit by even smaller shocks?
>> Thank Thank you, Simon. Um, one thing we'll all appreciate that we can't uh hide from is the need for structural transformation in in Uganda. Uh, and what does that mean? that we really have to shift from you know having uh close to 70% of your population >> employed in agriculture uh you know having services you know Uganda seems to have and not only Uganda I think I see it now with mostly uh many developing countries a jump from agriculture to services skipping industry and industrialization uh and basically when you zoom in to look at services the contribution of your GDP that comes from services you'll see telos you'll see banks, you'll see again those high level services. A number of those um are not uh indigenous. Uh these are institutions from outside the country and a number of these except one or two.
>> So some are local, some are indigenous.
We have quite a number of investors in the services sector. But then you'll find that the significant proportion of that is repatriated.
>> Absolutely. And so you have for example in Uganda uh about 47% of your GDP coming from services 22% from agriculture but remember agriculture is employing 68% of your population.
>> Now that's a structural rigidity a structural you get stuck in that kind of environment and earlier on Joseph talked about growth without jobs that even when you grow jobs are not created at the same pace and rate. So there's something we can't hide from that we must industrialize that we must cause structural transformation in favor of industrialization. Now what does that mean? That what you produce gets market.
>> Mhm.
>> Because if it's agree based uh raw materials you you invest invest in agrop processing you get raw materials from agriculture. So your farmers get better markets but also crops very addition and value on what you produce.
>> But you also create jobs along the value chain. They also create jobs sometimes exposed >> and then services also get as a result they would emerge definitely you want to bank the proceeds from industries you want to do all that but where has been the challenge and I think that's what you ask I think of recent we've seen strides >> uh and there's a commendable one u from our president >> stopping exportation of raw materials >> raw materials yes >> be it minerals mineral based raw materials be coffee and we hear that a lot are at export exportation of raw materials and yet again the driver and also the assumption is if you stop exportation we'll be forced to add value and we >> create those jobs locally >> we export more valued valued products but what we need to do and here it's really not a blame game sometimes we say government and we are all government financial institutions even the private sector government of some sort >> you find a government arm like parliament but government has not are one people.
>> Exactly. And and and this is what I feel and us as a financial sector, financial industry broader beyond UDB need to do.
One is reorientation of credit towards private productive sectors. Let me just paint a picture a little bit about the structure of our private sector credit uh uh in Uganda. So you have about 60% of private sector credit currently going to real estate going to trade about 15%.
And going to personal loans basically these are people who are working and are able to get salary loans for either consumption and so forth >> largely consumption.
>> Now 11% of private sector credit goes to agriculture 12% goes to manufacturing.
Now that pulls it to almost 90% and the rest supports other sectors. It's really hard to pull uh to to achieve the structural transformation if the financing industry is still structured that way skewed that way. And of course Joseph spoke to this earlier the crowding out effect of public borrowing of government borrowing that the other part most of the resources end up uh in government securities and so forth because they are safer. One might ask why are we not uh investing in agriculture and so forth. It's not that the financial industry doesn't want to do that. It's the cost the risks that we're talking about earlier.
>> And that's when I wanted to ask you I say I'm here at UDB. You're here gloating that when things get hard with other financial institutions. You have half the lending rate and you get people coming in here. Let me just ask boldly and uh and very candidly who qualifies for a facility from UD can aim like me walking here and get a facility and what kind of facility would an individual for example get? What are the areas that one riskree for you or at least have less risk that you have an appetite for? So that maybe even after discussing the impact of this global phenomena, a Ugandan listening and watching us then can make the decision to come down here uh and have a conversation with your team.
>> Exactly. So uh in the same context uh given the riskness of some sectors I think UDP slightly operates differently.
>> We are more risk loving because again the the goal >> risking >> yes less less risk averse. Uh-huh.
>> Risk loving in such a way that because where you find risk is where you find more development impact and so our appetite is more for development impact and less on profitability and and less on that and so that's what pushes us and I wanted to speak to that while I provided the structure of the financial industry in the country for UDB about 80% of our financing going to primary agriculture agro processing manufacturing and then you have the enabling infrastructure energy uh water for production irrigation and roads to some extent in far-reach areas uh that would uh aid access to markets and so forth. Uh and how do we do that? Of course you take a bit of risk like I've said I say risk loving not because we where you say there's risk we go but we go there prudently and carefully there are now financial innovations and instruments that we can structure that would enable you for example finance farmers I'll just use one example we have a fintech solution where we partner with a local fintech provider >> to support farmers organized under vsslas and how do we do that >> vs you know >> village savings and loan associations >> so In those Lord village savings and loan associations there's a bit of trust they push each other one to borrow but also to pay back >> pay back because they know each other they in the same place and exactly a negative you know speak in their >> so you can easily exploit that arrangement give them money and recoup but how do you do it also less costly because the key drivers of the cost of credit are the risk premium if you do it in risky areas but second it's the cost of >> of lending so you go supervise you go appraise and every time you go one once 10 million you use 6 million in that but using innovations like this fintech solution you're able to channel money without going there they are able to pay through a digital platform without them coming to the bank physically like you never get physically meet but you get to lend to them and you they they pay back through that platform we have other similar platforms probably and that's what my my appeal would be to the to the financial uh sector that we get to craft those innovative uh that banking uh and Joseph Alia talked about AI and these other digital platforms. Banking uh is going beyond brick and mortar there are instruments the innovative instruments we can design the innovative solutions we can design to lend and recover without necessarily spending a lot but also which would significantly bring down the cost um of credit uh and also bring down the risk. Let us agree that this is the inaugural webinar from Uganda Development Bank and the inaugural conversation is the impact of the Gulf situation as we know it now onto our economy at home. But this is going to be a quarterly conversation, Francis. And I have absolutely no doubt in my mind that one of the most exciting things to talk about at our next sessions would be just how to extend credit from here to the person that needs it the most out there without going through the vagaries of the kind of cost of doing business and them also being able to honor their side of the game without necessarily having to meet with you. I know Joseph it's uh coming to 8:00 for you and you've got domestic errands to run, you've got children to drop to school, you've got a a job to run to and yet for us on this other end, we are just belching after lunch and enjoying the afternoon session. So I'm afraid I may have to almost start the process of letting you go in as much as I must inform our viewers and listeners that we'll also open up this conversation for one or two or three questions to this incredible panel of uh brains. You cannot leave Dr. Joseph Mu to just walk away without a question from the audience. Neither can I let you go Francis without a question from the audience. But before I serve you to the audience, uh, Joseph, let me ask a hypothetical question that has about maybe an 80% chance of being real considering the fact that as we know the war, the ceasefire situation as is seems to be shaky and every single day we tune the radios and TV stations to get the latest on what usually is news that we don't expect the day before. And so one would want to ask if this conflict were to escalate further and maybe draw in regional uh forces to fight and this goes on up to say sometime in 2027.
What would be your single most important policy recommendation to Uganda's economic managers right now today? one that they may not be prioritizing with sufficient urgency. Let's not forget that maybe the thought process in our economic rooms is saying no come on this war should be over in two weeks like those who started thought would be done in less than a month but hypothetically if it went on up to next year or thereafter. What are some of those things that you'd advise our people now to start looking at seriously which maybe they've not thought about or they never think can be an issue of uh emergency.
>> Excellent looking question. But before I answer this question and and thank you so much for making me feeling bad about Uganda because I'm here in the morning and you guys are going in the afternoon.
Um allow me Simon to point out that uh the dynamics on the ground are shifting and shifting very fast. Um as pointed out earlier, Uganda will soon become an exporter of oil products and this changes everything as far as the discussion we are having right now is concerned. In this respect, Uganda will be able to benefit from higher oil prices. So I think what will be important then uh is how Uganda manages the expected windfall from oil and I hope that in the future Francis here will convene us again to have a detailed discussion uh on that. Of course, Uganda remains a net importer and prices are determined in the international market and even countries that are net importers, including the United States are seeing higher and higher prices at the pump. And this is very true. Prices have almost doubled in the United States of uh oil products.
Now, I want to point out two things. Um one is that the global environment has become more hostile. uh for instance um official development assistance or you can call it aid is declining and has been doing so quite honestly for some time and your political tensions and uncertainty have increased and these uncertainties are threatening the survival of a rulesbased playing field.
So what does this mean for Uganda? I think that Uganda can no longer afford to count on its rich friends abroad to help out during times of crisis as these times have changed.
But Dr. Francis has already provided some, you know, policy recommendations and I think those are excellent proposals that can be discussed.
But I think that we should do the following two things because you asked for one. Um I'll give you two.
>> The first one, the first one um is that we need to prepare to tighten our belts.
And I can think of this in two ways. The first one is to improve the quality of spending by government by reducing the waste and corruption. And this will ensure that every sharing spent goes on creating value, generating growth, jobs and buying resilience. This is very very important in such an environment.
The second is to think about reprioritizing spending in a way that protects the most vulnerable populations. I think that we need a social protection scheme or safetiness that works and one that is transparent and that can be scaled up as needed kind of to ensure that the most vulnerable in society are not left on their own. So those are my two tighten our belts think about how to support the most vulnerable in society. Thank you Simon. Thank you very much, Joseph. They are for one being um very true to the fact that uh some of the necessary very popular suggestions especially when you're telling a government which for the most part believes it's not even spending enough on itself and you're telling them tighten their belt. That may not necessarily come off as a very popular suggestion, but it is a practical one.
And we have seen that we say tighten our belts and we must all lead by example.
And of course taking care of the vulnerable ones. That's a very altruistic way of looking at things which I didn't know you as economists had in the heart of your discussions your conversations and we we thought you are mean self-centered and were looking at things as statistics and not real people. Now I will open the floodgates of questions to you but I've just seen from the uh forward questions that I've received about five of them and I'll mention their names. I must admit that maybe some of these questions came in earlier than when you tackled some of the questions they ask you about. But maybe for emphasis's sake, I'm going to read them out in an omnibus and then you can reiterate your responses because each one of you did speak to them. For example, Ayala Clovis does say why is Uganda particularly vulnerable to global oil price shocks during geopolitical conflicts? We talked about that but you can take a note of that. One Michael says, "In what ways could the conflict impact Ugandan migrant workers in the Middle East and remittance inflows?" I think we also did converse extensively around that. David Fortune does ask which sectors of Uganda's economy are most affected by the conflict and how are they impacted? Francis, you had a very good take at that and I know that you will be glad to, you know, wrap it up on in the other. And then Rebecca asks, "What are the likely effects of the conflict on households and small businesses in Uganda?"
>> Now in all really it's just to say what's the recap.
>> So I'll start with you Joseph because I know anytime you threaten to jump off because everything where you are runs on time. The train arrives at a particular time. So go first and then Francis him and I can you know take on the rest of the time.
U I I I I will draw my best >> to, you know, to disappear any time. I will stay as long as you want me to. Uh I knew that we would entice this man to stay with us longer than he expected.
Excuse me.
Thank you, Joseph. That's so kind of you.
>> So I will take uh I will take a few questions. I think um like you say this is a recap because some of these have been spoken about but uh let me speak to the issue of uh you know uh migrant workers and and and what that means. Now uh we know that Uganda receives about $1.5 billion uh in remittances. Uh that's the latest number uh that we have and about 30% of that which is about almost uh half a billion maybe maybe a little bit less 450 billion um sorry million comes from the Middle East alone and thinking about how many people we have in the Middle East could be anywhere between 300,000 and you know half a million uh people there. Of course, we are not quite sure because I mean you have those that are documented and you have those that are not documented.
>> But remittances have become so important for you.
>> Remittances have become so important for Uganda that they are more than the amount that we receive for instance in official government assistance and other flaws.
>> And importantly, remittances tend to come in when they are needed most. In economics, that's what we call uh counter. There's a shock in your country and then you can rely on your network abroad to bail you out. It could be any kind of shock. But also increasingly remittances have been used to finance not just consumption but also investment.
And remittances have been a channel of you know innovation and transformation.
And when these types of shocks do happen, two things do happen. One, you have a country that is experiencing a crisis and a kind of recession.
But you also have some activities. A lot of our people are working in in in in trade, in commerce, in airports and so on and so forth and they can't connect all support activities that they have in Uganda. So this has implications for local investment, local savings, livelihoods and so on and so forth. And as we have seen uh the implication can be big.
Somebody has asked about the sectors uh that could be you know affected and we have seen that the major you know channel through which this could impact Uganda is through the price of oil and therefore you have all the sectors that are linked to you know petroleum products in industry in in in transportation but there are also other sectors of a bigger and more transformative, you know, nature that we can think about.
Think of the GCC as a source of investment financing.
Islamic finance, the latest number I saw, we received about 800 million uh Uganda shillings. You can think about Saudi Arabia. You can think about Qatar.
You can think about the United Arab Emirates, Kuwait as having interests in our energy sector, in our minerals sector, but also increasingly in our agrop processing. Of course, they have interests in telecom and also in banking and finance. Now, when these are impacted, what does this mean? if the investment can't come you know as much as we expected we saw what happened to one of the local banks in Uganda when there was a conflict in one of the countries in Libya for instance you know the effect the ramifications can be uh can be huge and then there was a question on why uh Uganda is vulnerable now there's two things to this when shocks like this happen.
Sometimes the country is not affected as much as was feared >> and this is for two reasons.
Uh the first is a good reason and the second one is not a very good reason. Uh the good reason is that the authorities in Uganda to their credit sometimes act with urgency and purpose to the extent that they can. As we have discussed before, we saw that during the covid, we saw what happened in other countries and all the doom that was you know put out there. This is going to happen and so on and so forth.
And somehow we managed but we also managed because we have a large agriculture sector which kind of in my view is a shock absorber. So when things are bad and you can't go to, you know, a supermarket, Simon, to buy vegetables and tomatoes, >> you may have a plot of land in your backyard to do something. And these types of things sometimes do do happen as safety.
>> But the other one is that Uganda is not, you know, a major player and this is not the so good reason. is not a major player in you know in the global economic sphere. Our integration in global value chains in investment in finance and so on and so forth. The kind of things that make the US so vulnerable. The kind of things that make the EU or Korea all China so vulnerable.
We are kind of spared sometimes from those for those not so good reasons that we are not yet at a table where we can play uh with the big boys. Let me stop here maybe Franc. Yes.
I >> your honesty there and your humility to accept that we are still little boys and we are not yet at the table of men so to speak and not sound have these conversations but yes France uh Joseph there does make an attempt at answering all the questions that were brought to us in an in in you know in a nom. But there's an interesting question coming in from Anati Barongo which says does the current conflict present an opportunity for Uganda to accelerate energy independence and local production to reduce vulnerability to global shocks.
>> If only you could start with that one and then you can add to what uh Joseph did mention and then we now start gearing towards the conclusion of our conversation.
>> Thank you. Thank you. I I think that question uh feeds well uh to another question that is asking why Uganda is vulnerable.
>> Of course we are vulnerable because we are net importers. One of those is is energy. Uh but two of course energy, fuel, oil and all that. Uh and so this presents an opportunity like Joseph said now that we are seeing the first drop uh nearing because we are looking at 2027.
uh if we get that and I think with credential uh management of that uh we should be able to be self-reliant in the near future and reduce vulnerability.
But I think this presents an opportunity because when shocks like this hit uh one, you have to selfch check.
>> Yes.
>> What am I not doing right? How do I enhance my resilience? Uh given the fact that we are small players like Joseph indicated in economics, we say we are price takers. When you're so small, you don't influence the market.
>> You don't influence the price.
>> You take what is offered because your size you can. And I think that's the basis of all these uh regional blocks uh that are proposed this African community African free continental trade area and so forth because if we can take u the 1.5 billion population of Africa we probably can now become dictators in some way in some spaces either in raw materials and start dictating prices and so forth but as we are and I guess it's also one ways we can enhance our resilience that can we integrate, can we work together as East Africans, as Africans to work as a block and enhance our gaining power and maybe build resilience. But I think >> but you know how nice and flowery and very practical it looks on paper but when you get to the ground as we say here in Uganda.
>> Yeah. And right so and right so I some you sometimes look at uh just disagreements that can emerge just in a family to agree on. Now look at different states that have different cultures uh different trajectories probably also having them on the same table may not be as simple but >> that's not an excuse to not to push it's very important >> places that have integrated like Europe all of them were as fragmented as we have been different histories different realities in fact even different languages but here we are celebrating the European Union now what 50 years >> exactly >> and counting >> and so I think it's something that is achievable uh and it's one way we can enhance our bargainaining power we can also term uh we can manage uh these vulnerabilities and susceptibility to you know exposure to these uh shocks uh so yes it's an opportunity I agree uh to enhance our resilience but also our independence energy independence and other forms of independence especially uh when oil starts flowing uh but on on the other questions I think again at the risk of repeating what Joseph has already submitted >> why we are vulnerable it's the same small players net importers your 100% of your petroleum products are imported you'll definitely be vulnerable when such shocks hit >> and also when you're fully industrialized if that's what I learned from you is that you may have mangoes here and the best pineapples the world has ever seen but for as long as you do not transform those into packet juice that can stay longer on the shelf remain or importing.
>> Yeah, that's true.
>> You know, fruit juices from desert countries. Can you imagine that?
>> And we have them here on our shelves.
>> So, we need to do more structural transformation, industrialize >> so that we do import replacement, but also start tapping tapping into uh the markets out there. Uh that will enhance our reserves, we reduce our vulnerabilities, financial vulnerabilities. Uh I think it's something we've talked about uh that when you import largely import, you deplete your reserves. uh and we are seeing that when the cost of production when you're importing say oil expensively you're losing your forex that now triggers forex we have seen a depreciation of our shing I think now it's in the region of 3,700 >> around >> from around 3,400 500 >> in about uh what >> in about a month or so yeah from late fee to date uh and if this I think you are asking if this continues through next year probably we'll see uh more depreciation And that has significant implications, triggers inflation, uh policy rates, you see exchange rates increasing, affects lending capabilities because now the cost of credit is high and so forth. So I think uh vulnerabilities are there but oil shock remains a key shock until I think we produce uh uh we refine and start using our own product. But like also uh Joseph indicated it may not 100% cush on us from those increases but it will help us manage it. Industrialize is also one way we can the other talked about sectors. There was a question on the sectors that would be affected. I would say all sectors definitely >> because there's a thread that we >> there's a thread of the cost that we through of course some sectors will be disproportionately more affected like directly the transport um logistics and distribution that will be affected.
agriculture we talked about 20% of your fertilizers coming from that sub region.
So you might see that you know with a trigger the >> and even the remittances someone did ask specifically which feed into direct into household consumption but also buying inputs because these households do not just consume everything they receive they also buy a Greek uh inputs and so I think uh yeah broadly we've spoken to these but yeah there's an opportunity to do self-reflection to identifying keyhing fruits oil is one of those industrialization is one of those now that we are no longer exporting mineral based raw materials and other raw materials and probably we could build on that to enhance our country's res >> not forgetting what Joseph did prescribe stop wasteful expenditure if you are a government such as ours live within your means perhaps even below your means live in frugality and be well when we were in high school people who prescribe such things were known as misers or economists so I'm glad that I am talking to chief misers you and Joseph We have about uh less than 12 minutes to close our conversation at least from the time we agreed to have this conversation within. And so having had my go at you with the questions I prepared to put at you, then opening you up to the, you know, the wider audience of hundreds of folks on whom I we must thank for listening through this otherwise very complex conversation on a Wednesday hot afternoon in Kala and morning here in Washington. I may want now to just go through a two table, you and Joseph. I don't know. Do I go in alphabetical order or do I go with the furthest from me? Joseph, I'll start with you out of courty since you're not WJU and request that you may want to speak in three minutes to something around this issue or any salient issue that you may want to share using today's opportunity that I may not have asked you or the audience may not have picked up from your conversation or if there's a salient point in the many that you share with us this afternoon your morning that you may you want to particularly you Spotlight and underscore here is your chance.
>> Uh thank you so much Himmon. I I think that in every crisis um lies opportunity and I think that this crisis actually gives us an opportunity uh to think about things I mean so that we are not always more reactive uh you know to shortterm uh shocks as they arise. One of the things that we may have, I know a lot of discussions have been going on is that very soon Uganda becomes an exporter of oil. How prepared are we uh to take advantage of that? And the reason that I bring this up is that for so many countries that have discovered significant resources, resources that change the way you think about revenue generation, resources that change the way you think about sources of growth.
Certain things change, you know, tend to happen in those countries and down the road they can look back and say, "Hey, look what happened here." And we have lots of examples of such countries in Africa. You can think about Ghana at some point Ghana you know was doing so well and then something fortunate happened oil in 2010 and Ghana went through a period of turbulence and at some point was in debt distress. Now when countries begin to export significant resources, there's something called the Dutch disease. You might lose competitiveness in other, you know, sectors of the economy >> and Dr. Francis here knows about this.
We've been discussing agriculture and industry and so on and so forth. You don't want oil to herald in the death of the other sectors that are extremely important for poverty reduction, for job creation and so on and so forth. And especially since oil is an enclave activity, extremely capital intensive. A lot of the capital is foreign and so on and so forth. and the linkages with the rest of the real economy are so minimal except through revenue that goes directly uh to government too.
Countries that begin to rely on resources sometimes lose this connection with the people. the kind of social contract if I may that you have that is sometimes built you know through the give and take uh of you know taxation and so on and so forth and we know that service delivery in Uganda is not so great. So how do we want things to you know evolve as we transition? Because if this conversation had happened after Uganda became a net exporter of oil probably it would have gone in a slightly different direction slightly different direction but this is the reality which is a very great opportunity. So how do we reflect but also how do we reflect on all the things that we have discussed right now the you know the lack of implementation of policies there isn't a single thing that you are going to touch in Uganda and propose a policy that hasn't been thought about before and probably somewhere gathering dust uh on a table the conversations that we are having on you know the allocation of credit Is it going to real estate all you know uh people who are going to marry all you know industry and so on and so forth.
This conversations are not new but what do we do to ensure that we see traction in these areas. Now the other discussion that I would have wished to see and maybe Francis can speak a little bit that I know that he has is some of the things that we have discussed like credit. Now when you think agriculture or industry these need patient capital and banks commercial banks are not tailored to do that. So there is a whole mismatch there and the question I have therefore is how can the kind of you know support that UDB does be scaled up you know maybe do we need a kind of capital push uh on you know on on you know on on there's a facility on agriculture financing at the bank of Uganda how is that doing and so on and so forth so how do we get traction on the things one in the policy space but also interventions elsewhere that we already have and how do we scale those for me that's my biggest reflection that I want to put on the table thank you >> tremendous thank you very much uh Joseph and without a doubt you've set the stage very well for the closing remarks of our host uh Francis over to you >> thank you Simon Joseph yeah you've given me clear direction of what I should speak to um with those questions. Yeah, private sector credit. Uh definitely we need um concessional uh that is affordable finance uh long-term finance.
>> Uh but of course there are things we also speak to if you look at the size of the economy visav and and and Joseph um speaks to do we need to capitalize more uh UDB or uh and I would say yes. uh the example we always use is looking at the size of UDB visav the size of the economy that you want to drive uh so if we are now north of 200 trillion economy and then UDB let's say uh two trillion uh what does uh that mean% of >> so essentially to drive that economy you need to be of a sizable size and and and and what we research has showed that votement financing uh should be in the region of 15% of GDP >> uh or 35% of private sector credit uh but then UDB is about 6.8% 8% of the private sector credit. Definitely you would need to >> capitalize more uh development finance institutions in the country to enhance uh their capacity to reach out to the bigger uh I would say to enhance their scope their products and to be able to drive that transformation that we are looking at.
>> You need to who are you referring to who needs to capitalize >> DFIs are government institutions? So it would be government and of course sometimes people would look at government envelope to say okay can they get money and give it to you but there are different innovative again ways of capitalizing an institution.
>> Sorry I'm just giving a rapid fire kind of questioning approach but you get moments to have these conversations with folks in government. Yes we do >> and they listen to you.
>> Yes they do. And uh I'm not saying the government hasn't capitalized because they continuously capitalize us. Uh but the discussions we have is also uh how do we also innovatively start raising uh through capital markets for instance uh raising money through uh issuing uh instruments like bonds and so forth to raise more money because definitely we're talking about the fiscal space uh we're talking about I mean the constraints also the government has so probably they cannot just get money and continuously capitalize the bank but you could um again together with government being a institution come up with other instruments of raising uh money that we can uh uh deploy. But what I wanted to speak to also as you you asked for the areas that we um that would like to speak to in the policy brief um and it links the question on uh why uh are we still vulnerable to oil uh oils? Um so we have a proposal again it's it's a proposal it can be refined of having sort of a rule-based uh system of a stabilization buffer where you really set say thresholds and this probably would even work now that we will start producing our own oil that below a certain threshold there's a levy that goes into that stabilization fund or buffer that you call in whenever prices go bazak like we are seeing skyrocket.
So in a way and again it will not be a subsidy like Joseph indicated hard to sustain but that buffer that stabilization buffer would really help the government to call in addition to the reserves because I think also we need to build significant reserves uh to take us through uh a period of time when these prices raise and lastly uh industrial policy. I think uh as a country and different institutions uh as a government but different institutions need to look at how do we achieve structure transformation >> how do we industrialize what's the role of different institutions be it uh banks commercial banks involvement finance institutions we have a role to play uh in the bank we have an approach we have adopted of program based financing because it looks like the silo interventions will not help uh so probably we need to go grand scale so the program what we call demand generation prog uh sort of value chain targeting where you look at the entire value chain and work through partnerships and working with different u partners uh you see how you can raise and support the entire value chain uh if it's an agree value chain look at supporting producers uh post-h harvest management look at adding value and then throughaging logistics >> packaging logistics and then through trade financing see how you can support access to markets probably that would change because what we've realized you support a processor tomorrow they come back without they tell you I don't have sufficient supply of raw materials >> so it means you would need someone to support farmers if it's another value chain for different could be none a Greek so probably this is the new one government already started on this journey when they talked of program based uh budgeting the NPA NDP3 approach we probably need to move into that to together move um industrialization and change the structure of our economy.
>> Tremendous Joseph Francis and the hundreds of you listening to us. We couldn't say deeper. Thank you for taking time off your very busy schedules to discuss this deeply, this candidly, and this insightfully. A subject that affects us in many ways, but a subject that for the most part we never get to have our head wrapped around it from a global perspective. And that is why this conversation has been very important for myself, Simon Casier, I will share with you just three things that I pick from this conversation by way of summary.
Number one, and this may even act as a housekeeping rule or a piece of information that the UDB policy brief that we've referenced to severally is, you know, publicly available and it's on the website of the Uganda Development Bank, which is at www.udbl.co.ug.
Eugi and so I implore all of us to go back to that document read it and get to see the finer print of what Francis and Joseph have been trying to explain in their economies that's the language of economies if I may coin my own English word number two I have realized without a fear of contradiction that the shocks that are being talked about are real but so are the policy options that you have prescribed to us so the purpose of today's conversation was really to sharpen our collective thinking and move from anxiety to understanding. So for the most part we worry rather than understand and solutions never come from an anxious mind. They come from a mind that seeks to understand and moves forward. And very finally which I also consider most importantly from my end is that economic resilience is not built in crisis and I think both of you did underscore that point that this is built in the years before one crisis arrives that you need to build this resilience without a crisis at hand so that you plan for a rainy day so to speak and so as I would say in conclusion Uganda's greatest task is to simply survive this shock is not simply survive this shock but to emerge from it more structurally sound than it entered and that is the work of every policy maker every entrepreneur every student in the audience every ordinary person journalist like myself whoever it is that has tuned in it is all hands on deck if this must turn around we can't leave it it's too serious a matter to leave to these economic doctors on their own or UDB or the world bank or journalist like myself all of us must have our hands on deck to ensure that we stem the tide. Thank you.
And we'll meet, God willing, at another opportunity to have another of these webinars that I'm told are going to be a quarterly fixture where the Uganda Development Bank comes to you with a silent conversation of the issue at hand at that point and we digest it to finer details and we believe that from today's conversations, we've had a better understanding of this situation more than we did. from all of us. It's a rap and good afternoon, good morning, Joseph.
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