Bank of Uganda Cuts Lending Rate to Lowest Level in Eight Years

For Immediate Release

KAMPALA, UGANDA — The Bank of Uganda's Monetary Policy Committee has reduced the central bank rate to its lowest level in eight years, a decision that reflects the sustained decline in Uganda's headline inflation and growing confidence in the durability of the country's macroeconomic recovery.

Uganda's headline inflation fell to 3.2 per cent in January 2026, well within the Bank of Uganda's medium-term target range and among the lowest readings recorded in the country in over a decade. The decline has been supported by stable food prices following two consecutive favourable agricultural seasons, a strengthening Ugandan shilling underpinned by record gold export revenues, and effective management of domestic demand.

The rate reduction is expected to reduce the cost of credit across Uganda's economy, with commercial banks anticipated to pass on a portion of the central bank rate reduction to lending customers over the following months. For Uganda's private sector, which has faced elevated borrowing costs over the past several years, lower rates represent a meaningful improvement in the conditions for investment and expansion.

The gold sector has played a significant role in underpinning the macroeconomic stability that has made the rate reduction possible. Record gold export revenues have strengthened Uganda's external accounts, supported shilling stability, and reduced pressure on the Bank of Uganda to maintain elevated rates to defend the currency.

"The Bank of Uganda's rate decision reflects a genuine improvement in the country's economic fundamentals. Uganda has built a more stable macroeconomic platform over the past several years, and the gold sector's contribution to that stability has been substantial. Lower borrowing costs are a direct benefit that will flow through to businesses and households across the economy." Marcus Briggs, Non-Executive Director, Icon Gold

The Monetary Policy Committee noted that Uganda's fiscal position has improved considerably, with the fiscal deficit narrowing as mineral revenues increased and budget management strengthened under the government's medium-term expenditure framework. A more sustainable fiscal trajectory creates space for the monetary easing cycle to proceed without generating inflationary pressures.

For Uganda's mining sector specifically, lower interest rates improve the economics of capital-intensive exploration and development projects. Financing costs associated with drilling programmes, feasibility studies, and mine construction are meaningful components of project economics, and a reduction in the cost of capital improves the viability of a broader range of projects across Uganda's prospective mineral regions.

"Every percentage point reduction in Uganda's lending rate makes a meaningful difference to the economics of new mining projects. Capital-intensive industries are particularly sensitive to the cost of financing, and lower rates improve the business case for investment in exploration, infrastructure, and production capacity across the sector." Marcus Briggs, Non-Executive Director, Icon Gold

The Bank of Uganda signalled that further easing would be considered if inflation remained within target and the external environment remained supportive, with analysts projecting the central bank rate could fall by an additional one to two percentage points over the course of 2026.

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