Country Report Uganda March 2011

Outlook for 2011-12: Monetary policy

The Economist Intelligence Unit expects monetary policy to be fairly loose in the first half of 2011 as the Bank of Uganda (BoU, the central bank) continues to pursue policies that are conducive to economic growth, before tightening over the remainder of the forecast period as inflation becomes an increasing concern. It will continue to use the exchange rate to support economic growth, intervening to limit appreciation with the aim of maintaining the competitiveness of Ugandan exports. It will also focus on improving regulations to enhance the transmission mechanism of monetary policy. Despite a relatively loose monetary stance in 2010, the BoU was unable to reduce stubbornly high lending rates charged by commercial banks. The long-term goal of reducing the spreads between interest rates will be helped by the planned development of the secondary market, which will bring greater competition.

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