Peter Mushangwe, a bank analyst at Moody's, said the move taken by the banks amid an economic slowdown is positive because it will enable them to better manage NPL, which are set to increase in the coming quarters.
According to a survey by the country's central bank, Bank of Uganda, on a net basis, banks expect the default rate on loans to both enterprises and households to increase before December 2020.
The projected increase is mainly attributed to the negative impact of the COVID-19 pandemic on business activities, employment and incomes of firms and households.
At the continental level, Moody's said that rising pressure on African governments caused by the COVID-19 pandemic is weighing on domestic banks because the creditworthiness of the banks is inextricably linked to the financial strength of the government in the country where they are based.
As a result, when sovereign creditworthiness deteriorates, bank creditworthiness comes under pressure in most cases, according to Moody's.
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