27 May Interview with Michael Atingi-Ego, Governor of the Central Bank of Uganda
Uganda maintained one of Africa’s lowest inflation rates in 2024. What key strategies did the Bank of Uganda (BoU) employ to achieve this and how do you plan to sustain this stability amid global economic uncertainties?
Uganda maintains one of the lowest inflation rates in Africa, not by chance, but through deliberate, data-driven monetary policy. We acted decisively from the start. When inflationary pressures began to rise in early 2022, we responded. In January 2022, inflation was around 2.5%. However, after one of the longest COVID-19 lockdowns, the economy fully reopened, including schools. The sudden demand for scholastic materials, amid limited supply due to earlier closures, triggered inflation to rise slightly. Then in February, the Russia-Ukraine conflict caused a spike in global commodity prices. What started as a rise in commodity inflation soon spread across the broader consumer basket. By May, inflation was more widespread and we tightened monetary policy. We raised the policy rate by 350 basis points over four months, increased the cash reserve ratio by 200 basis points and adjusted reserve money operations.
At the same time, capital outflows driven by tightening in advanced economies led to a sharp depreciation of the Uganda shilling. Our response helped stabilize the situation. In 2022, we also faced one of the longest droughts on record, with food crop inflation surging from -5% to 33% by December. The government chose not to introduce subsidies, allowing full pass-through of price pressures. Combined with global inflation and a depreciating currency, domestic prices rose significantly. Despite limited reserves, we let the currency adjust and tightened monetary policy,raising the policy rate and cash reserve ratio and adjusting reserve money operations. Inflation rose from 2.7% in January to a peak of 10.7% in October 2022.
Since then, it has steadily declined, averaging 3.5% headline and 3.9% core by April. We expect inflation to remain between 4.5% and 5% in FY 2025-26, aligning with our medium-term target of 5%, which we have maintained over the past two years.
Could you share a bit about your experience in the US?
I spent 12 years at the International Monetary Fund in Washington, serving as deputy director in the African Department. I oversaw reviews for 12 African countries, focusing on staff programs, Article IV consultations and capacity development. I also led major statistical reforms and spearheaded data management improvements across the Fund. This role gave me broad experience managing diverse economic shocks. I learned that responding to crises requires decisiveness, clear communication and extraordinary — not routine — measures. During recent shocks, we acted swiftly and communicated openly, especially when using demand-side tools to address supply-driven inflation.
The BoU launched an environmental, social and governance (ESG) framework for the banking industry in 2024. How is this initiative influencing the financial sector’s approach to sustainability and responsible banking practices?
This marks a transformational shift in our financial sector. We are emphasizing that for finance to be sustainable, the environment it operates in must also be sustainable. Business models must now create value not just for shareholders, but for all stakeholders, communities and the environment.
With the launch of our ESG framework in June 2024, we have made a bold commitment to embed sustainability, ethical governance and social responsibility. We call it ethical financing — financing that prioritizes long-term sustainability. As we implement the ESG framework, we aim to mainstream sustainability across the banking sector. A sustainable financial system requires a sustainable operating environment. We are strengthening climate risk management, promoting inclusive growth and raising governance standards. By aligning with international ESG best practices, we believe Uganda’s financial sector will become more attractive to investors and development finance institutions, boosting both investment and financial market development.
What steps is the BoU taking to enhance digital financial services and ensure broader access across Uganda?
In Uganda, we see digital finance and inclusion not just as conveniences, but as catalysts for equitable economic growth. By reaching the last mile and integrating more people into the monetary system, we empower communities and strengthen monetary policy transmission. Greater financial inclusion boosts savings mobilization, enabling the financial sector to channel funds into investment and working capital — key drivers of higher, sustainable growth.
The Agricultural Credit Facility (ACF) and Small Business Recovery Fund (SBRF) have been pivotal in supporting SMEs. Can you share insights into their impact and any plans for their expansion?
The ACF and SBRF have been vital for financial inclusion, especially in agriculture, which employs 70% of Ugandans but is often seen as high risk. Through the Bank of Uganda, the government channels zero-interest funds to selected financial institutions, which then lend to smallholder farmers and MSMEs at reduced rates of 10–12%.
So far, over $300 million has been disbursed to around 6,000 beneficiaries — 94% of them small farmers and rural enterprises. The program supports not only on-farm production, but also grain trading, agro-processing and post-harvest handling. It has promoted gender and regional inclusion and maintained a non-performing loan rate of under 1%, proving both high impact and low credit risk.
With the increasing reliance on digital banking, how is the BoU addressing cybersecurity threats and ensuring the resilience of Uganda’s financial systems?
Cybercrime remains a major concern and the Bank of Uganda has adopted a proactive, multi-layered approach to digital risk management. In December 2023, we issued updated cybersecurity and technology risk guidelines to all supervised financial institutions, covering governance, incident reporting, business continuity, data protection and third-party risk.
We have also integrated cybersecurity into our risk-based supervision and established a Cybersecurity Center of Excellence. We are building institutional capacity, promoting threat intelligence and encouraging real-time information sharing because when one bank is attacked, others must be alerted. We are also working with global partners, including the Basel Committee on Banking Supervision, to strengthen our defenses. Ultimately, robust cybersecurity is essential to ensuring safe, sustainable digital finance.
The BoU raised capital requirements for financial institutions to enhance stability. What has been the response from the banking sector and how do you assess the impact of this policy?
Our capital requirements were last revised in 2010, yet since then, Uganda’s economy has grown significantly and so have financial system risks. Meanwhile, regional peers have already updated their capital standards. With major investments like oil and gas requiring substantial financing, our banks, due to low capital levels, have been unable to fully participate. As a result, funding has largely come from abroad, meaning lost opportunities and tax revenue.
To address this, we raised the paid-up capital for commercial banks from $6.85 million to $41 million — a sixfold increase. This better positions our banks to finance large-scale projects, either directly or through syndicated lending, and helps align our financial sector with the growing economy. Risks like cybersecurity and operational and credit risks have increased, requiring a stronger capital base to absorb potential shocks.
Most commercial banks have met the new requirements, with only three still working on capital restoration plans. As a result, the financial system is now more resilient, asset quality and risk management have improved and investor and depositor confidence has grown. Some smaller banks unable to meet the capital are merging with others to comply. These strategic moves will create a stronger, more competitive banking sector.
With the finalization of the Islamic banking regulatory framework in 2023, what progress has been made in implementing Islamic banking services in Uganda?
Some progress has been made. We have licensed one Islamic bank so far. Several conventional banks plan to offer Islamic windows to provide Sharia-compliant products without becoming full Islamic banks. We have raised awareness about these products, but the regulatory framework is still being updated to fully support Islamic banking. The current law limits some offerings, so we are revising it to better accommodate Islamic finance. We are also exploring regional partnerships with Kenya and Tanzania, where Islamic banking is more advanced, to promote growth in this sector. Overall, there is strong interest, but we need the right regulations to support it.
Uganda ranked fourth in the 2024 Absa Africa Financial Markets Index. What factors contributed to this achievement and how does the BoU plan to build on this momentum?
In 2020, Uganda ranked 10th and is now 4th. Our strongest area is macroeconomic stability, with inflation as low as 2.9% and growth around 5%. Modernizing the payment system and legal reforms have boosted financial market development,
making our laws some of the best in the region. Innovations in foreign exchange management, digital financial inclusion and ESG integration have also helped. However, Uganda lags in pension sector reforms, which if addressed, could improve our ranking further. To maintain progress, we are deepening financial markets by diversifying beyond government securities and introducing sukuk, green, infrastructure and Astrea bonds. We are also working on a netting bill to improve market liquidity and transparency by enabling players to net assets and liabilities, supporting collateral use in transactions.
We will support innovation alongside strong risk management, as both are essential in financial markets. Our goal is to boost investor confidence by ensuring timely payments, stable exchange rates and competitive interest rates. We also aim to strengthen regional cooperation to deepen markets and diversify the investor base.
As the newly appointed governor of the BoU, what is your overarching vision for the institution and what key priorities will guide your tenure?
I envision a modern 21st-century central bank that goes beyond macroeconomic stability to promote inclusive prosperity, ethical and sustainable financing and technological advancement. Together with my team, I want the Bank of Uganda to be forward-looking, digitally empowered and sustainability-driven to support transformation, financial inclusion and public trust, all while maintaining macroeconomic excellence.
What is your final message to the readers of USA Today?
The Bank of Uganda will continue to prioritize price and financial stability. We will accelerate digital financial inclusion despite cybersecurity challenges, deepen capital markets and promote financial innovation. Sustainability and ESG principles will be embedded in our work, alongside supporting MSMEs. We aim to build a motivated staff that ensures institutional excellence and public trust. In a world of global shocks and uncertainty, we must be agile, versatile and innovative to respond quickly and effectively to challenges.