Uganda's business community wants the central bank to stop raising borrowing costs. The Bank of Uganda (BoU) announces its next monetary policy decision on Monday, November 9, the Daily Monitor reported. Analysts are split on whether it will hold or hike.
At a special meeting on October 14, the bank raised the Central Bank Rate from 9.75% to 12%. It was the first change since October 2024 and the biggest single rise since October 2011, according to the Monitor. The move also took the rate to its highest level since December 2016. The bank blamed the escalating Middle East conflict, higher oil prices and heavy pressure on the shilling.
Inflation has kept climbing since then. Headline inflation hit 5.8% in October, its highest in more than three years. It stood at 4.6% in September and 4.1% in August. The bank now expects headline inflation to average 7% to 7.5% over the next 12 months, above its 5% target. It has also cut its 2026/27 growth forecast to between 6% and 6.5%, down from 7% to 7.5%.
Commercial banks are now passing on the October hike. Absa raised its shilling prime rate from 19.5% to 21.75% from November 1. DFCU moves from 20% to 22% on December 1, and Stanbic has announced a similar increase from the same date. For ordinary Ugandans, that means dearer loans on top of higher fuel, food and transport costs.
Uganda Manufacturers Association chairman Aga Sekalala Jr said higher prime rates had already pushed up loan repayments and tightened cash flow. He said manufacturers had put some borrowing plans on hold. "Another hike now would only squeeze manufacturers harder when the economy is already slowing," he said. Makerere University Business School economist Fred Muhumuza also expects the bank to pause and give the October move time to work.
Stephen Kaboyo of Alpha Capital Partners disagrees. He noted that the shilling has gained on better dollar supply and that oil slipped below $95 a barrel for the first time in two months. But he warned that the currency remains exposed to global shocks. He said there was a "high chance" the bank would raise the rate to anchor inflation expectations. The shilling fell past Shs4,500 to the dollar in late October before recovering to around Shs4,040 to Shs4,050.