Businesses Plead with Bank of Uganda to Hold Rates Ahead of Crucial Decision

The Ugandan business community is holding its breath as the Bank of Uganda prepares to announce its latest monetary policy decision. Following a dramatic October meeting where the Central Bank Rate (CBR) was hiked by 225 basis points to 12 percent—the largest single increase in over a decade—commercial banks have begun passing on higher borrowing costs to customers, pushing prime lending rates above 21 percent.

Manufacturers argue that the current economic squeeze has already gone far enough. Aga Sekalala Jr, Chairman of the Uganda Manufacturers Association, noted that higher loan repayments and tighter cash flows have forced many producers to place their borrowing and expansion plans on hold. Echoing these concerns, economic experts suggest the central bank should hold the rate steady to allow previous monetary tightening time to work through the economy without causing further damage.

Conversely, financial market analysts point to rising headline inflation, which climbed to 5.8 percent in October, well above the 5 percent target. Experts warn that keeping rates on hold could allow inflationary pressures and exchange rate vulnerabilities to become entrenched. A further hike would signal a strong commitment to price stability and help anchor inflation expectations, though it would immediately translate into heavier debt burdens for struggling enterprises.

With households already grappling with elevated costs for fuel, food, and transport, the central bank faces a delicate balancing act between curbing inflation and safeguarding economic growth. More details can be found in the Daily Monitor report.