Bank of Uganda maintains February lending rate at 9.75%

Uganda’s central bank has decided to maintain its key lending rate at 9.75% for the second time in a row, citing a strengthening local currency amid steady investment in the country’s oil-and-gas industry.

This decision is expected to support the country’s economic growth, which has been steadily increasing, with a 6.7% growth rate in the first quarter of the fiscal year 2024-25.

According to Bank of Uganda Deputy Governor Michael Atingi-Ego, “The economic growth is supported by a stable macroeconomic environment, foreign direct investment and the anticipated oil revenue.”

He also noted that stronger capital inflows had helped strengthen the local currency and lower inflation.The oil and gas industry is expected to play a significant role in Uganda’s economic growth, with TotalEnergies and Cnooc Ltd developing a 230,000 barrels-a-day crude project along Uganda’s western border with the Democratic Republic of Congo.

The project is expected to commence commercial production before the end of the year, with total investments in the oil fields and a 900-mile crude export pipeline to the Tanzanian port of Tanga expected to top $10 billion by the end of 2025.

Despite the positive domestic picture, the Bank of Uganda remained wary of external risks. Geopolitical tensions, particularly in Eastern Europe, and policy uncertainty in major economies continued to cast a shadow over the global economic outlook. These factors could potentially disrupt supply chains, trigger inflationary pressures, and dampen investor sentiment, all of which could have implications for Uganda’sThe central bank’s decision to hold the lending rate steady was a testament to its commitment to maintaining a delicate balance between supporting economic growth and containing inflation. By keeping borrowing costs stable, the bank aimed to encourage investment and lending, while also ensuring that prices remained under control.

While the immediate outlook for Uganda’s economy appeared positive, the central bank remained vigilant in monitoring global developments. The bank’s future policy decisions would depend on a variety of factors, including the evolution of global risks, the trajectory of inflation, and the pace of economic growth.

Uganda’s lending rate in February 2025 was a reflection of the country’s steady economic progress, supported by investments in the oil and gas sector, and prudent monetary policy. However, the central bank remained cautious in its outlook, acknowledging the potential challenges posed by global uncertainties. As Uganda navigated these complex economic currents, its lending rate would continue to play a crucial role in shaping the nation’s financial landscape.

The benchmark interest rate in Uganda has averaged 11.15% from 2011 until 2024, reaching an all-time high of 23.00% in November of 2011 and a record low of 6.50% in June of 2021. The lending interest rate in Uganda was reported at 19.85% in 2018, according to the World Bank.