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Bank of Uganda Blames Low U.S. Interest Rates for Shs2 Trillion Loss

Uganda’s central bank pointed to “abnormally low” rates for U.S. Treasury securities as a major reason behind the reported loss of 2 trillion shillings ($545 million) in the past 15 years.

Over 90% of Bank of Uganda’s earnings are from interest income on foreign-reserve assets, spokeswoman Charity Mugumya said in an emailed response to questions, after lawmakers last week raised concerns about the bank’s ability to deliver on its mandate.

“The global financial crisis that started in 2007-8 and associated economic recession led to a decline in global interest rates on these assets from about 5.24% in 2005-2007 to just 0.5% in 2010-12,” she said. “The abnormally low interest rates adversely affected BoU’s income.”

BoU made losses of 859.2 billion shillings and 72.6 billion shillings in the past two fiscal years, according to its statistics. Finance State Minister David Bahati told parliament last week that it lost 2 trillion shillings in 15 years and only turned a profit in 2007.

Central banks’ primary monetary-policy goals are price stability, optimal economic growth and financial stability. While making a profit is a distant priority, losses threaten their independence and often result in governments having to replenish their capital.

BoU has delivered on its constitutional mandate of maintaining low and stable inflation and a sound financial system, Mugumya said. The costs relating to this core business accounted for 72.3% of total expenditure in the fiscal year through June 2019, she said.

“The delivery of these public goods comes with costs, yet they are provided without any charge,” she said. “BoU’s credibility remains intact because it has consistently delivered on its constitutional mandate.”


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