Uganda's central bank sells dollars as shilling falls despite recent rate hike

The Bank of Uganda issued a notice on October 22 indicating that it is now active in the foreign-exchange market as a seller of dollars, responding to a renewed decline in the shilling. This follows an emergency policy meeting on October 14 where the Monetary Policy Committee raised the policy rate by 225 basis points to 12% to address currency pressure and rising inflation. The shilling initially gained after the rate hike but soon fell back to new lows against the US dollar.

Earlier that day the bank had reportedly sold about $30 million, though it did not confirm the amount publicly. President Yoweri Museveni had recently opposed using reserves to defend the currency, arguing that a weaker shilling benefits exporters. Uganda's foreign-exchange reserves stand at $6.52 billion, below the central bank’s four-month target, and one outlet-account deficit widened by $1.4 billion. The central bank also raised its inflation outlook and trimmed growth forecasts for the fiscal year ending June 2027.