Bank of Uganda Maintains Key Lending Rate at 9.75%, Balancing Inflation Control and Growth

Understanding the CBR

The Central Bank Rate (CBR) is the benchmark interest rate that guides how commercial banks price their loans and deposits. When the BoU raises the CBR, borrowing becomes more expensive, helping to curb inflation by discouraging excessive spending and credit growth. Conversely, lowering the rate makes borrowing cheaper, stimulating investment and consumption but potentially risking inflationary pressure.

By holding the rate at 9.75%, the central bank aims to strike a balance—keeping prices stable while ensuring the economy continues to expand sustainably. Analysts say this decision signals confidence in Uganda’s macroeconomic fundamentals but also a recognition of the need to avoid overheating the economy through excessive credit expansion.

Balancing Stability and Access to Credit

The BoU said easing core inflation and strong domestic demand justify maintaining the rate. However, financial experts note that keeping the rate high may constrain credit access for businesses and households, particularly during the festive quarter, when spending typically rises.

Small and medium enterprises (SMEs), which rely heavily on credit to restock and meet seasonal demand, may find it harder to access affordable loans. “It’s a tightrope walk,” one economist said. “The central bank is rightly keeping inflation in check, but the downside is reduced credit flow in the private sector.”

Looking Ahead

The central bank’s outlook remains cautiously optimistic. Officials project that with continued fiscal discipline, improved agricultural output, and recovering global demand, Uganda’s economy will maintain strong growth momentum through 2026.

Still, much will depend on how external shocks—such as global commodity price swings and regional instability—affect domestic inflation and trade flows. For now, the BoU’s steady hand on monetary policy suggests a commitment to safeguarding stability, even as borrowers continue to feel the pinch.