Shopkeepers across the capital city of Kampala in Uganda have shut down to protest the country’s high interest rates. Many of these businesses are also boycotting banks.

Soaring inflation -- from 30 percent to 45 percent over the past year -- forced Uganda’s central bank to sharply raise interest rates, prompting local banks to do likewise. From August 2011 to December, the central bank raised the benchmark interest rate from 13 percent to 23 percent. The average prime lending rate for Uganda’s commercial banks stands at between 28-29 percent, making it virtually impossible for business owners to repay debt.

The Kampala City Traders' Association, which organized the strike after negotiations with government officials broke down, has vowed to keep stores closed for three days. Over that period, business owners threatened to withdraw their savings from local commercial banks and make no deposits.

We are not saying they should not increase interest rates, the traders association spokesperson Isa Sekito told BBC.
What we are saying is that they should not increase rates on old loans.”

Sekito told Reuters: We made our call to members to close their shops for three days so that these banks can listen to us. And we're thrilled that the response has been massive and even traders from many other towns have joined us. This theft by banks must stop.

An angry shopkeeper named Abdu Nkonge told Reuters: I am furious at these thieving banks. All they care about is squeezing as much as possible from us. What if our businesses collapse from these high interest rates? Who will bank with them, where will they get deposits?

Uganda’s Prime Minister Amama Mbabazi criticized the strike/boycott.

I don't think striking will save [traders'] property; I don't think striking will save your business, he told BBC.

In fact, striking will hurt you and hurt all of us as a country.”

Moreover, banking officials said its hands are tied with respect to rates.

The chairman of Uganda Bankers' Association chairman, Emmanuel Turyamuhika, told Reuters: It's impossible; no bank will revise its interest rates downwards because we trade in money and the cost of money has gone up. Traders are asking why we're hiking interest on old loans but it's obvious that's a replacement cost otherwise if we only raised interest on new loans we would not be able to secure fresh capital for new loans.

BBC noted that Kampala is an important trading hub for East Africa, attracting shoppers from across Uganda, as well as Eastern DR Congo, South Sudan. Eyewitness reports indicate that the normally bustling city is practically a ghost town.