Uganda's Low Inflation Contrasts with High Business Lending Rates

Uganda is currently experiencing a period of relative price stability, with its annual headline inflation recorded at 3.7% in June 2026, the lowest among reporting East African Community (EAC) partner states. This favorable macroeconomic condition, however, is overshadowed by the persistent high cost of accessing finance for businesses.

Despite a slight decrease from 18.9% to 16.9%, Uganda’s average lending rate remained the highest within the EAC for the quarter ending June 2026. This elevated cost of credit significantly impacts the private sector, potentially limiting investment, hindering production expansion, and impeding job creation, even as stable prices offer predictable operating costs.

Further compounding the issue, Uganda’s 91-day Treasury bill rate also stood at 10.2%, the highest among reporting partner states. This rate serves as a benchmark for broader credit pricing in financial markets, indicating that the cost of government borrowing influences the rates offered to businesses seeking loans for various operational needs.

Across the region, other EAC nations saw varied interest rate trends. For instance, Tanzania’s Treasury bill rate dropped to 3.6%, while Kenya’s rose to 8.7%. Lending rates also exhibited mixed movements, with increases in Tanzania, Burundi, and Rwanda, and declines in Kenya, Uganda, and South Sudan.

The article contrasts this with a positive regional trade performance and an expansion in private sector credit across the EAC. However, for Ugandan businesses, the juxtaposition of low inflation and high borrowing costs remains a critical challenge for future growth and investment.

Source: Nile Post