The Bank of Uganda (BoU) has maintained the Central Bank Rate (CBR) at 9.75%, citing a balanced, but uncertain inflation outlook and global economic risks.
Governor Michael Atingi-Ego announced the decision during the reading of the May 2025 Monetary Policy Statement (MPS), following a meeting of the Monetary Policy Committee (MPC) on Tuesday.
The decision, which keeps the rediscount rate at 12.75% and the bank rate at 13.75%, reflects the BoU’s cautious stance amid global tensions, volatile commodity prices, and ongoing domestic economic resilience.
Inflation to Average 4.5%–5% in FY2025/26
Governor Atingi-Ego said inflation is expected to average between 4.5% and 5% in the 2025/26 financial year, aligning with the February 2025 forecast.
The outlook has slightly improved in the short term, largely due to a stable exchange rate and falling global oil prices.
“In the near term, inflation will likely remain subdued. Our projections are underpinned by lower energy costs and a more stable shilling. We expect inflation to converge to our 5% target over the medium term,” said Atingi-Ego.
However, the Governor warned of upside risks to this outlook, including strong domestic demand driven by rising investments.
These investments are to be raised in the oil and gas sector, adverse weather affecting food production, and geopolitical tensions that could disrupt global supply chains.
“Depreciation of the exchange rate due to global financial market volatility also poses a risk,” he cited.
The governor noted the possible downside risks that could bring inflation even lower. These include stronger capital inflows into the oil and gas sector, better agricultural production due to good weather, and continued declines in global commodity and energy prices.
Economic Growth Remains Resilient
Despite global shocks, Uganda’s economy remains resilient. The Governor noted that real GDP grew by an average of 6% in the first half of the 2024/25 financial year.
According to the Uganda Bureau of Statistics (UBOS). This is a marked improvement compared to the same period in 2023/24.
“This growth has been supported by improved household spending and rising real incomes,” he explained.
Growth for the full financial year 2024/25 is projected to be between 6% and 6.5%, with expectations of hitting 7% in the outer years.
These projections are driven by improvements in agriculture and industry, extractive sector investments, and continued implementation of government programs like the Parish Development Model (PDM).
Yet, Atingi-Ego cautioned that Uganda’s economy may be approaching capacity limits. “If growth continues to accelerate rapidly, it could outstrip supply and lead to inflationary pressures,” he warned.
Risks to Growth Still Loom
While the economic outlook is positive, the Governor said the risks are tilted to the downside. These include global supply chain disruptions, slower global growth, tighter financial conditions, and political uncertainty.
“The downside risks are significant. Global economic fragmentation and changing trade patterns, especially due to renewed tariff wars, could affect Uganda’s export performance,” he said.
However, there are also upside risks. These include stronger investments in the extractive sector, supportive government policies, and stronger tourism recovery.
“Despite strong current performance, the external environment remains fragile. We are closely monitoring global developments,” Atingi-Ego said.
Liquidity Conditions Improving
Adam Mugume, the Director of Research and Policy at BoU, said improved liquidity conditions have helped ease interbank lending rates.
“In March and April, we saw a softening of interbank rates due to better liquidity. This is partly due to our monetary operations and fiscal activities,” Mugume said.
He explained that while the securities market has remained oversubscribed, changes in bond yields, especially for long-term securities, are a result of strategic investor behavior.
“Investors want to lock in high yields for longer tenors, especially since the government is expected to reduce domestic borrowing in the future,” he said.
Mugume also noted that lending rates declined to an average of 17.7% in the quarter to March 2025, down from the previous quarter.
Cybersecurity is a Growing Threat
Governor Atingi-Ego also highlighted the increasing risk of cybercrime, calling it a serious concern for the financial sector. He urged the public to be vigilant with their financial data.
“It takes two to tango. While we are raising awareness, we appeal to the public to protect their personal information and avoid sharing sensitive details like ATM PINs,” he advised.
He noted that the BoU is working closely with supervised financial institutions to strengthen cybersecurity infrastructure.
Trade tensions add to policy uncertainty
The Governor also addressed the volatility in global trade policy. He pointed to the recent sharp reduction in tariffs between the U.S. and China as an example of how rapidly the global environment can shift.
“The U.S. dropped tariffs on Chinese goods to 30%, and China responded by reducing its tariffs to 10%. But this agreement is only for 90 days, we don’t know what happens next,” he said.
“These uncertainties make monetary policy decision-making extremely difficult. You cannot change policy today only to reverse it tomorrow,” Atingi-Ego emphasized.
BoU is committed to macroeconomic stability
Despite the challenges, Atingi-Ego reiterated the BoU’s commitment to maintaining macroeconomic stability.
“We have faced many challenges, COVID-19, the Russia-Ukraine war, World Bank aid cuts, but we have done what it takes to maintain price and exchange rate stability,” he said.
He assured the public that the Bank will continue to adjust its policy stance as needed, guided by new data and risk assessments.
Promoting financial inclusion
Deputy Governor Augustus Nuwagaba addressed the role of mobile money and financial technology in promoting financial inclusion.
“This offers a major pathway to include more people in the monetary economy, especially in areas underserved by traditional banks,” he said.
Nuwagaba emphasized that mobile money and agency banking are key to reaching rural populations, given that most of Uganda’s 22 commercial banks are concentrated in urban areas.
However, he acknowledged challenges related to internet connectivity and cybersecurity. “We’ve seen media reports of data breaches and intrusions. These undermine public confidence in digital platforms,” he said.
To address this, he called for greater investment in digital infrastructure. “We want the government to provide an enabling environment, especially in infrastructure, so private investors can operate efficiently.”
He added, “If you want the private sector to thrive in this space, they need support. Many investors prefer soft assets because they won’t build the hard infrastructure. That’s where government must step in.”
Monetary policy outlook remains cautious
In his conclusion, the Governor said future changes to the CBR will depend on new data and emerging risks. The BoU will continue to evaluate global and domestic developments carefully.
According to Atingi-Ego, this is a period of heightened uncertainty. That’s why we are taking a cautious approach.
“Our policy stance remains appropriate to support economic growth while keeping inflation within target,” the governor concluded.
The BoU’s continued commitment to price stability, financial inclusion, and a resilient economy was the central message of this month’s MPS.
But with global risks looming large, the road ahead remains uncertain, and cautious navigation is key.