Despite lowering its inflation expectations, the Bank of Uganda (BoU) has kept its tight monetary policy unchanged. The Central Bank Rate will remain at 9.75 percent, where it has stayed for the past 13 months.
The bank says the economy still faces ongoing risks at home and abroad, which require caution. Yesterday, the Monetary Policy Committee (MPC) explained that although Uganda’s economic situation is improving, unpredictable conditions both globally and locally could still affect the short-term outlook. The committee said the Central Bank is committed to keeping prices stable, controlling inflation, and supporting economic growth in a changing environment.
Tight monetary policy helps Ugandans by reducing inflation and keeping prices stable. When the value of money is protected, people and businesses can plan their spending and investments more confidently, which encourages more economic activity across the country. While presenting the monetary policy statement, BoU Governor Michael Atingi-Ego said the inflation outlook is now slightly better than what was predicted in August.
Core inflation is now projected to be between 4.0 percent and 4.5 percent, down from the earlier forecast of 4.5 percent to 4.8 percent for Financial Year (FY) 2025/2026. This remains below the 5 percent target over the next 12 months. He said overall outlook is balanced, with both risks that could increase inflation and those that could reduce it.
On the upside, rising global geopolitical tensions could interrupt food and energy supplies, while stronger domestic demand driven by government projects could also put more pressure on prices. Downside risks include continued inflows of foreign capital into the oil sector, better weather leading to higher food production, and lower global interest rates which could reduce the cost of imported goods. Uganda’s economy grew by 6.3 percent in FY2024/2025 compared to 6.1 percent the previous year.
This growth came from improvements in farming and industry, and from greater spending and investment in the economy. Early economic indicators show continued confidence in FY2025/2026.
The economy is expected to grow by 6.5-7.0 percent this year and reach an average of 8 percent in the coming years. Dr Atingi-Ego said this shows the economy’s strength, helped by careful monetary policy, targeted government spending, and better global growth.
A major global credit rating agency, S and P Global Ratings, recently improved Uganda’s economic outlook, showing trust in the country’s strong progress. Dr Atingi-Ego noted that despite the encouraging outlook, several global challenges remain such as higher trade barriers, tight global financial conditions, and low business confidence.
Rating
S and P Global Ratings, on November 7, revised its outlook on Uganda to positive from stable, while keeping the country’s credit rating at B-/B. It also raised the transfer and convertibility rating to B from B-. S and P said the outlook reflects expected stronger growth and higher income per person, driven by good terms of trade and key oil projects expected to start within a year.