We expect monetary policy to remain fairly loose throughout the forecast period as the Bank of Uganda (BoU, the central bank) seeks to boost economic growth as inflationary pressures fall. The interesting question will be how the BoU aims to loosen policy, as its recent attempts have been unsuccessful in reducing the stubbornly high interest rates charged by commercial banks. We believe that it will take a two-pronged approach. First, the BoU's recent utterances suggest that it will return to using the exchange rate to support economic growth, intervening to lean against appreciation with the aim of making Ugandan exports more competitive abroad. Second, we expect improvements to regulations to improve the transmission mechanism of monetary policy. The long-term goal of reducing the spreads between interest rates will receive a boost from a recent scheme allowing non-bank financial institutions to deal in government securities. The development of the secondary market during the forecast period will bring greater competition and may reduce the interest-rate spread, making credit conditions more favourable.