economy 15 October 2026 Daily Monitor (Uganda)
Economists Criticize Bank of Uganda's Rate Hike, Fear Economic Slowdown
Economists have voiced concerns over the Bank of Uganda's recent decision to increase interest rates, arguing that the move to make borrowing more expensive could negatively impact businesses, employment, and household finances, without necessarily curbing inflation. Source: https://www.monitor.co.ug/uganda/news/national/economists-fault-central-bank-action-to-make-money-more-expensive-5632918
The Bank of Uganda’s (BoU) decision to implement an emergency interest rate hike has drawn sharp criticism from economists who predict a detrimental effect on the Ugandan economy. The move, aimed at stabilizing the shilling and controlling inflation, is feared to deepen existing credit constraints for businesses and households.
Governor Michael Atingi-Ego convened an unscheduled Monetary Policy Committee meeting, signaling the central bank’s concern over the shilling’s depreciation to Shs4,100 against the dollar and escalating fuel prices. However, economists argue that making money more expensive could stifle investment, lead to job losses, and reduce disposable income for citizens.
Instead of tackling the root causes of inflation, such as supply chain disruptions or global commodity price shocks, the rate hike might act as a blunt instrument, slowing down economic activity. Experts suggest that the BoU should explore more targeted interventions rather than broadly restricting credit, which could disproportionately affect small and medium-sized enterprises.
The potential consequences include a further squeeze on private sector credit, making it harder for businesses to access essential funding for operations and expansion. This, in turn, could dampen overall economic growth and hinder recovery efforts. The long-term implications of such a policy shift are yet to be fully understood, but the immediate outlook suggests a challenging period for Ugandan businesses and consumers.