By Jonathan Kamoga
Uganda’s Central Bank has maintained the Central Bank Rate (CBR) at 9.75% in February 2025.
The bank said on Tuesday that this was because this level supports price stability while fostering the country’s sustainable economic growth.
The CBR is an indicative interest rate that the Central Bank uses to influence the cost of money, either upwards or downwards, depending mainly on the need to regulate the amount of money in circulation.
The latest economic data shows that overall and core inflation stood at 3.6 percent and 4.2 percent, respectively, in January 2025, up from 3.3 percent to 3.9 percent in December 2024.
The bank projects that economic growth for FY2024/25 will remain between 6.0% and 6.5% and 7.0% in later years.
To support growth within the same period, on the one hand, the bank expects stronger investment in oil and minerals and effective government interventions to play a critical role.
The country has a target of seeing its first oil this year, and the sector has so far attracted about $20 billion worth of investments in developing production facilities, a refinery, and the East African crude oil pipeline.
On the other hand, however, BOU points out unfavourable weather that negatively affects food crop harvests, tighter financial conditions, and slower global growth as key hindrances to the growth of Uganda’s economy in the period under review.
Inflation is projected to be between 4.0% and 5.0% over the next 12 months and to stabilize around the target in the next 2 to 3 years.
How Stanbic Bank CFO Ronald Makata Blends Governance, Technology and Human Leadership to Drive Performance“Factors that could raise Inflation are further disruptions to global trade, extreme weather events that could drive up food prices, higher import prices, and increased domestic demand,” BOU said in a statement.
According to the bank, two factors including lower oil prices and strengthening of the Uganda shilling could play a major role in lowering inflation.
Inflation remains relatively low, largely due to previous CBR adjustments, stability in the exchange rate driven by reforms in Uganda’s interbank foreign exchange market, and declining global inflationary pressures.
Additionally, favorable food and energy prices have supported stable inflation.
In January 2025, annual headline and core inflation rose to 3.6% and 4.2%, respectively, from 3.3% and 3.9% in December 2024, primarily due to an increase in services inflation, particularly in passenger transport services.
The bank last cut its policy rate by 50 basis points in August after year-on-year inflation fell below 5% in June.
After confirmation by parliament’s appointment committee On Tuesday, the new Bank of Uganda Governor, Dr Michael Atingi-Ego, warned that currently, the country is experiencing several uncertainties that could impact the domestic economy, which explains the need for innovation, anticipation of what is going to happen and taking appropriate responses.
“We think that in 2025, inflation will be anywhere between four and five percent. This is consistent with the growth target that we are looking at in the medium term of six to seven percent,” he said.
By and large, Uganda’s economy, the banks said has performed better than many of its peers on the continent in the period under review mainly because of an environment of tightening global financial conditions, favorable weather, and improved agricultural production.
