Bank of Uganda tightens monetary rules to protect the Shilling from inflation

The Bank of Uganda (BoU) has adopted a stricter monetary policy stance, warning citizens and businesses to prepare for reduced money circulation and higher borrowing costs. Governor Dr. Michael Atingi-Ego announced the updated policy framework, noting that the central bank has revised its inflation outlook upward to shield the purchasing power of the Ugandan Shilling.

The policy adjustments come in response to mounting domestic and external economic pressures, including rising international oil prices, a widening current account deficit, and weakened portfolio inflows. Over the next 12 months, core inflation is projected to average between 6.0 and 6.5 percent, while headline inflation is anticipated to range from 7.5 to 8.0 percent.

These adjustments are expected to slow economic growth in the short term as households cut back on non-essential spending and businesses face increased financing hurdles. The BoU has trimmed its growth forecast for the 2026/2027 financial year to between 5.5 and 6.0 percent, citing tighter financial conditions and persistent global geopolitical uncertainties.

Despite near-term challenges, central bank officials remain optimistic about the medium-term economic outlook. Anticipated oil production is projected to generate substantial annual foreign exchange inflows, bolstering the country’s external sector and supporting the Tenfold Growth Strategy through targeted investments in agro-industrialization, tourism, and mineral development.

Read more details about the central bank’s monetary stance on the Daily Monitor.