In a global financial climate increasingly shaped by the Artificial Intelligence (AI) euphoria, volatile stock markets, and shifting monetary policies, Bank of Uganda (BoU) has chosen a remarkably calm path.
The Central Bank Rate (CBR) remains at 9.75 percent, a level now maintained for five consecutive meetings.
While major economies debate and often panic over inflation spikes and AI-fuelled asset bubbles, BoU is betting on steadiness, drawing confidence from low inflation, strong economic growth, and persistent external risks that require measured responses.
In its November briefing, BoU said holding the CBR ‘shows confidence in the improving economic outlook,’ calling attention to an economic environment that, despite global shocks, continues to show resilience.
Its focus remains on keeping inflation below 5 percent, supporting long-term growth, and avoiding policy decisions that could unsettle an already delicate environment.
Inflation has been a cooperative partner over the past year; headline inflation averaged 3.6 percent, while core inflation stood at 3.9 percent, both well within target.
Lower energy prices, a stronger shilling, and disciplined monetary policy have kept price pressures in check.
BoU expects inflation to remain between 4 and 4.5 percent.
The growth story has also played in BoU’s favour, with the economy growing by 6.7 percent in the first quarter of 2024/25, driven by a rebound in industry and sustained momentum in agriculture and services.
Full-year growth has reached 6.3 percent, supported by stronger household spending and robust private investment.
BoU projects growth of 6.5 to 7 percent in 2025/26, rising to around 8 percent over the medium term.
This momentum has seen S and P revise Uganda’s outlook from ‘stable’ to ‘positive,’ citing strengthening fundamentals and improved prospects.
Still, BoU is not blind to the turbulence beyond Uganda. The world’s financial system remains on the edge, and Uganda, like other emerging markets, must navigate the spillovers.
Earlier in the year, BoU governor Michael Atingi-Ego warned that rising global trade tensions could feed into domestic inflation if major economies imposed new tariffs.
‘We will end up importing some of that inflation,’ he said, noting that Uganda would then face the difficult choice of tightening monetary policy.
US continues to cast a long shadow over global markets. By May, the policy conversation had shifted to a temporary tariff truce between US and China, leaving central bankers unsure whether global conditions were stabilising or merely pausing before another round of volatility.
By August, new fears emerged over US’ ballooning fiscal deficit, with bond yields, which often draw capital away from emerging markets, moving northwards.
The global environment grew even more complex when a 43-day US government shutdown delayed critical economic data.
Analysts called it a ‘data vacuum,’ forcing the Federal Reserve to act more cautiously. In such uncertain conditions, the dollar tends to strengthen, tightening financial conditions for countries like Uganda.
Then came the AI mania. The ‘Magnificent Seven’ tech giants soared to valuations reminiscent of the dot-com bubble, prompting warnings from banks such as JP Morgan.
To justify their aggressive AI investments through 2030, analysts argue, these firms would need unusually high revenue streams.
Given that US equities now represent 20 percent of household wealth, any sharp correction could ripple through global markets, dampening growth in Europe, China, and across emerging economies.
Closer to home, experts are divided on how an AI-driven correction would affect Uganda. Denis Kizito of the Capital Markets Authority believes a sell-off in US could steer investors toward undervalued African equities.
But equities consultant Gitta Expeditto argues that Uganda’s markets, dominated by institutional investors, are insulated from global swings and respond more to earnings and dividends than speculative trends.
With this uncertainty swirling, BoU’s decision to stay steady looks increasingly rational.
Its strategy reflects a delicate balancing act; keeping rates high enough to cushion the economy should global growth falter, but not so high to suffocate domestic activity.
Uganda’s rising foreign-exchange reserves offer additional reassurance, standing at $5.4b, close to four months of import cover.
Yet BoU cautions that purchasing dollars injects shillings into the economy, potentially stoking inflation, calling for a balance between building external buffers and maintaining price stability.
The gold-purchase programme remains in its preparatory stage, with systems still being set up, but it signals a long-term ambition to diversify reserve assets.
As AI transforms global markets and geopolitical tensions intensify, Uganda is choosing consistency over excitement.
BoU’s quiet confidence, rooted in low inflation, strong growth, and disciplined policy, offers a rare steady note in an increasingly unpredictable world.