The Bank of Uganda (BoU) plays a pivotal role in maintaining macroeconomic stability, safeguarding the financial system, and fostering economic growth. Established in 1966 and governed by the Bank of Uganda Act (Cap 51, 2000) and the Constitution, it carries a dual mandate: maintaining price stability and ensuring overall financial system resilience.
1. Legal Mandate and Institutional Structure
- The BoU is empowered by Article 161 of the Constitution and the Bank of Uganda Act 2000 to implement monetary policy and maintain economic stability Uganda LawsBank of Uganda.
- Its governing body includes a Governor, Deputy Governor, Secretary to the Treasury, and several appointed directors Uganda Laws.
2. Primary Functions of the BoU
a) Monetary Stability
- The BoU targets 5% medium-term core inflation using the inflation-targeting lite framework initiated in 2011 IMF eLibraryBank of Uganda.
- Key monetary tools include:
- The Central Bank Rate (CBR), which sets the benchmark for interest rates Bank of Uganda.
- Operations using repurchase agreements and BoU bills to regulate liquidity and influence money market rates Bank of Uganda.
- Post-MPC, the Governor publicly explains decisions via press conferences and reports Bank of Uganda.
b) Financial Sector Regulation and Stability
- The BoU supervises and regulates commercial banks, microfinance institutions, credit reference bureaus, and more to uphold prudential norms Uganda LawsBank for International Settlements.
- Established the Financial Stability Department for sector surveillance, stress testing, and crisis preparedness archive.bou.or.ugBank of Uganda.
- Implements macroprudential policies through the Financial Stability Committee and engages in systemic risk mitigation Bank of UgandaIMF eLibrary.
- Coordinates with multiple regulators via the Financial Sector Stability Forum (FSSF) for unified financial oversight IMF eLibraryBank of Uganda.
c) Currency and Financial Operations
- The BoU issues currency, manages foreign exchange reserves, acts as a bank to the government and financial institutions, and serves as a clearinghouse Uganda LawsIMF.
- Manages reserves, undertaking interventions in spot FX markets when needed IMF.
d) Government Adviser and Banker
- The BoU advises the government on monetary policy, banking, and scale implementation of growth programs aligned with economic objectives Uganda LawsIMF.
3. Real-World Insights: BoU’s 2024–2025 Policy Performance
- In 2024, the CBR fluctuated: raised from 9.5% to 10.25%, later eased to 9.75% by November as inflation stabilized near 2.9% and core inflation dropped to 3.8% Kikubo Laneceo.co.ug.
- Throughout 2025, the rate was held stable at 9.75%, with inflation forecast projected between 4%–5% amid global economic uncertainties Reuters.
- Notably, Uganda’s inflation management ranked second-lowest in Africa, thanks to effective policy coordination and exchange rate resilience ceo.co.ugReuters.
- The BoU boosted systemic stability by increasing liquidity and capital reserves, reducing non-performing loans, and ensuring banks hold reserves far exceeding mandatory levels Kikubo Laneceo.co.ug.
- On modernizing systems, back-office upgrades like the Global Master Repurchase Agreement and the Real-Time Gross Settlement (RTGS) improved market functioning and payment infrastructure Kikubo Laneceo.co.ug.
- Uganda exited the FATF greylist due to enhanced anti-money laundering frameworks and financial oversight ceo.co.ug.
4. Summary Table
| Area | Highlighted Role of BoU |
|---|---|
| Price Stability | Maintains inflation target (~5%) using inflation targeting |
| Financial Regulation | Oversees financial institutions and implements macroprudential tools |
| Currency & FX Management | Manages reserves and intervenes to stabilize the shilling |
| Payment Infrastructure | Enhances real-time and large-value settlement systems |
| Crisis Preparedness | Conducts stress testing and implements systemic risk frameworks |
| Public Confidence | Ensures stability and institutional trust via deposit protections and oversight |
5. Why It Matters to Ugandans
- Stable prices help households and businesses plan with confidence.
- A resilient financial system protects savings and supports borrowing.
- Sound oversight and infrastructure lower risks and improve access to finance.
- Economic credibility attracts investment and funds vital development areas like oil production.
By balancing the dual goals of price control and financial sector resilience, the Bank of Uganda plays a foundational role in sustaining economic growth and preserving public trust in the financial system.
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