Attracting more capital into Uganda through the banking system provides major benefits, because it should allow a higher rate of investment than would otherwise be possible, but it also carries risks, as the experience of many emerging markets has demonstrated.
It makes both the balance of payments and the banking system vulnerable to a “sudden stop” in short term private capital flows, which could be triggered by contagion from events which have nothing to do with Uganda. In addition the volatility of short term private capital flows can make the exchange rate less stable. How should we mitigate these risks?