The move to reduce aggregate demand for improved savings has not only been adopted as a financial stance for the central Bank, but it’s now the only option for Ugandans to survive. The high cost of operation even with additional power from Bujagali is likely to keep the cost of finance high regardless of the central bank’s decision to relax on its lending rates.
Commercial banks have now zeroed to enlightening their customers on wise financial decisions to avoid manipulative perceptions out of financial illiteracy. The commissioning of a 50 mega watt turbine at Jinja Bujagali dam and the reduction of the central bank rate this week are such positive steps to fairly less costly operation and living standards in Uganda.
The 50 megawatts turbine is the phase of the 250 megawatts full capacity production expected to be fully operational by July this year. This means that Uganda main grid received another additional 50 megawatts to make 635 total megawatts.
This will be supplemented with another 50 mega in March to make an additional 50 again. This may on the surface create hope that with such subsequent power additional to the national grid, the cost of production directly linked to power inefficiencies would drop.
But this may remain a myth as the cost of power would never drop in the near future until 2016, when the country anticipates producing at least 3885 megawatts of power from all the power plants combined.
The additional Bujagali megawatts to the main grid will not in any way reflect in the consumer new power tariff, therefore the hiked power charges remain un -changed.
The increased power tariffs do not only worry individual consumers but the central as well expressed worries of the possible effects on the economy.
The reduction in the Central bank rate and the corresponding commercial bank reduction may not be a long sustainable solution to the reduced cost of finance in this country.
This is because there other factors that led to the 2011 crisis in which the economy was almost at the verge of collapsing.
The promotion of a saving culture by individual banks through financial literacy clinics to their customers should be a centre of resource allocation this year; otherwise last years’ crisis may resurface with adverse effects coupled with increased levels of risky loans.
The cost of power is so integral in all aspects of operations, that it affects all regardless of whether one uses power directly or indirectly.
Those who use the power at high cost reflect such costs in general prices of goods and services that eventually become a blanket crisis. The cost of finance is another which depends directly on the cost of power since most of the bank systems are automated. Therefore the banks can never break even if the customers don’t get the right reasons why they access finance at costly charges and also help them to only access finance only when it is worth through rational financial decisions.
