Uganda Interest Rate2011-2020 Data | 2021-2022 Forecast | Calendar | Historical

The Bank of Uganda left its benchmark interest rate unchanged at a record low of 7% during its August 2020 meeting, after slashing it by 100bps in June, citing an extremely uncertain economic outlook largely because of the unpredictable intensity and duration of the Covid-19 pandemic. Policymakers said that domestic economic activity is estimated to have contracted by 3.2% in the second quarter, but it is expected to slowly recover amid the gradual easing of lockdown restrictions. Therefore, economic growth is seen at around 3-4% in 2020, before picking up to 5-6% in 2021, but remaining below its potential level until 2022. Meanwhile, the balance of risks to the inflation forecast are assessed to be on the upside with core inflation expected to rise above the 5% target within 12 months, reflecting the influence of containment measures particularly on public transport and increases in prices of imported consumer goods as a result of higher taxes to support import substitution.

The Bank of Uganda cut its benchmark interest rate by 100bps to 7% on June 8th 2020, aiming to support the economy which has been battered by a coronavirus lockdown. It follows a similar 100bps cut in April and brings the borrowing cost to the lowest level since at least 2011.

The Bank of Uganda lowered its benchmark lending rate to 8% during its April 2020 meeting, in a bid to cushion the coronavirus-induced deterioration in macroeconomic conditions and in order to ensure adequate access to credit and the normal functioning of financial markets Consequently, the country's economic growth is seen slowing drastically in the second half of 2019/2020 to 3-4% from a previous estimate of 6%. Policymakers added that although it is expected the GDP growth to gradually recover in the second half of 2020/2021, the emerging output gap is projected to persist until 2022. Meanwhile, inflationary pressures are expected to remain subdued, amid weaker domestic demand and lower external pressures in the face of the global downturn. Inflation is seen in the range of 2-3% in 2020, assuming that the COVID-19 pandemic is contained by June 2020 and the economy recovers gradually in the second half of 2020.

The Bank of Uganda held its benchmark lending rate at 9% during its February 2020 meeting, citing balanced risks to inflation and the need of maintain an accommodative monetary stance to support growth. In January 2020, headline inflation moderated to 3.4%, after hitting a 15-month high of 3.6% in December and is projected to remain low assuming stability in food prices and currency. The bank also kept its 2019/20 economic growth forecast of 5.5-6%, while expects it to accelerate to 6.3% in the medium term, though below the estimate of potential growth of 6.5%. Meantime, the Governor expressed concerns over export weakness, amid risks related to the recent coronavirus outbreak in China and agricultural production constraints due to uncertain weather patterns and a massive invasion of desert locusts.