The Bank of Uganda (BoU) has maintained the Central Bank Rate (CBR) at 9.75% signalling a cautious “wait and see” approach in response to growing global economic uncertainty most notably the unresolved US-China trade tensions.
The decision comes despite Uganda’s relatively strong economic performance in the first quarter of the 2024/2025 fiscal year, where the economy posted a growth rate of 6%. However, BoU officials caution that global headwinds could soon spill over into the domestic economy.
“While the Ugandan economy grew by 6% in the first quarter of 2024/2025, the Bank of Uganda projects slower growth in major economies like the US, China, and the UK, which may affect the Ugandan economy as well,” said Dr. Michael Atingi-Ego, Governor of the Bank of Uganda.
With a temporary 90-day diplomatic window available in the global trade conflict, the central bank says making a long-term policy shift remains difficult, as the outcome of the geopolitical standoff is still uncertain.
Beyond global slowdowns, other factors are complicating the economic outlook.
These include a *freeze on concessional funding* from institutions like the World Bank and IMF, along with new executive orders from Washington that could impact foreign aid and investment in the region.
“Despite global and regional economic headwinds—including a concessional funding freeze from the World Bank and IMF, plus recent executive orders from Washington—the Bank of Uganda is confident the economy will weather the storm,” said Dr. Atingi-Ego.
“The banking sector has demonstrated resilience. Twenty-one out of 23 regulated commercial banks declared profits in billions, with only two reporting losses or reduced profits.”
The Central Bank attributes this resilience to prudent monetary policy and commercial banks shifting their lending preferences from the private sector to government securities—a safer, more predictable alternative in uncertain times.
“Banks have shown stability and confidence,”
Executive Director for Supervision at BoU.
“The strategy of lending more to government has provided a safe haven amid global turbulence.”
Further supporting stability, the Ugandan Shilling has remained relatively stable** against the US Dollar. Liquidity conditions in the money market have also improved, with interbank rates holding steady around 12%. Yields on longer-term government securities have shown modest increases.
“Improved liquidity and stable exchange rates have helped maintain confidence in the financial system,”said *Dr. Adam Mugume*, Executive Director for Research at BoU.
“We continue to monitor global developments closely.”
As the global economic picture remains murky, BoU’s stance underscores the delicate balancing act between promoting domestic growth and safeguarding financial stability. For now, the Bank of Uganda has chosen caution over action.