The Bank of Uganda has raised its benchmark interest rate to 12 per cent from 9.75 per cent. The central bank made the decision to contain inflation and currency pressures as the shilling weakens against the dollar and international fuel prices climb. The bank also increased the Cash Reserve Requirement for commercial banks from 11 per cent to 13.5 per cent, tightening the amount of money available for lending.
For ordinary Ugandans, the effects will be felt in two main ways. The cost of living is likely to keep rising because a weaker shilling makes imported goods, fuel, medicines and machinery more expensive. At the same time, borrowing from commercial banks will become more costly. Anyone with a variable-rate loan could see their monthly repayments increase. Small businesses that rely on bank financing to buy stock or expand will face higher costs of credit.
Uganda's economy is still expected to grow, but the growth projection for the 2026/27 financial year has been revised down from between seven and 7.5 per cent to between six and 6.5 per cent, according to information accompanying the monetary policy decision. Slower growth means less momentum for businesses and job creation. However, remittances from Ugandans abroad have risen to 3.1 billion dollars from 2.7 billion dollars, providing important support for families receiving money from relatives overseas.
For households and small businesses, practical steps include reviewing monthly spending to separate essentials from discretionary purchases, calculating loan repayments across a range of possible interest rates before borrowing, and where possible building emergency savings. Businesses depending on imported stock should assess how exchange-rate movements could affect their costs and prices.