Growth forecast revised downward

The Bank of Uganda has lowered its economic growth forecast for the 2026/2027 fiscal year to between 6 and 6.5 percent, a decrease from its earlier estimate of 7 to 7.5 percent. This adjustment reflects a range of economic challenges, including tighter financial conditions at home and abroad, a weaker Ugandan shilling, and higher global energy prices.

Geopolitical tensions add to concerns

The Central Bank of Uganda also pointed to increasing geopolitical tensions as a factor in its revised forecast. While the bank acknowledges these challenges, it remains optimistic about the medium-term outlook, expecting an average growth rate of around 8 percent as external pressures ease and domestic policies take effect.

Private sector and exports to drive growth

The anticipated economic recovery is expected to be fueled by private investment, increased exports, development in the oil sector, and government strategies designed to boost growth. However, the bank warned that several risks, such as high energy and transport costs, ongoing geopolitical issues, trade disruptions, and adverse weather, could hinder progress.

Policy rate increased to control inflation

In response to rising inflation, the Central Bank of Uganda raised its key policy rate by 225 basis points, increasing it from 9.75 percent to 12 percent. This move aims to curb inflationary pressures, manage the impact of higher energy prices, and stabilize inflation expectations among the public and businesses.

Inflation rises due to domestic price pressures

Overall inflation in Uganda rose from 4.1 percent in August to 4.6 percent in September 2026, driven mainly by higher prices for staple agricultural products and fuels. This increase is linked to the ongoing effects of the Ugandan shilling's depreciation, which has gradually pushed up the cost of imported goods and services.