The Bank of Uganda (BOU) is the Central Bank of the Republic of Uganda. Established in 1966, by Act of Parliament, BOU is 100% owned by the Government of Uganda, but is not a government department.

The Bank of Uganda (BoU) is the Central Bank of the Republic of Uganda. It was opened on the 15th August 1966. It is 100% owned by the Government of Uganda but it is not a government Department. Bank of Uganda conducts all its activities in close association with the Ministry of Finance, Planning and Economic Development(MoFPED).

Bank of Uganda is responsible for monetary policy and maintaining price stability.

Mission of Bank of Uganda

To foster price stability and a sound financial system.

Vision of Bank of Uganda

To be a center of excellence in upholding macroeconomic stability.

Location of Bank of Uganda

Bank of Uganda Headquarters are located on Plot 37/45 Kampala Road. The Bank has 5 branches headed by Branch Managers in Kampala, Jinja, Mbale, Gulu and Mbarara towns.

The Bank also has 4 Currency Centers headed by Currency Officers in Kabale, Fort Portal, Arua and Masaka towns.

Management of the Bank of Uganda

The Board of Directors is responsible for overall management of the Bank. It is appointed by the President of the Republic of Uganda and is composed of:

1. The Governor and Chairman of the Board;
2. The Deputy Governor and Deputy Chairman of the Board;
3. Not more than 5 other members.

Functions of the Bank

The Bank of Uganda conducts all its activities with the aim of fulfing its Mission. These activities are carried out under the mandate of the Bank of Uganda Act, 2000 and other legislature.

The Bank's core activities are:

• Issuance of Uganda's national currency/legal tender, the Uganda Shilling (UGX);
• Regulation of money supply through Monetary Policy;
• Banker to the Government of Uganda;
• Banker to Commercial Banks;
• Supervision and regulation of Financial Institutions;
• Management of the country's external/foreign reserves;
• Management of Uganda's external debt;
• Adviser of Government on financial and economic issues;
• The Bank also has responsibility to the public and this is fulfilled through its Corporate Social Responsibility programs.

Governance and Organisation of the Bank

According to Article 161 of the Constitution of the Republic of Uganda, the authority of the Bank of Uganda shall vest in a Board which shall consist of a Governor, a Deputy Governor and not more than five other members.

The Governor and Deputy Governor are appointed by the President with the approval of Parliament.

They serve a five year term and are eligible for re-appointment. The office of Governor and Deputy Governor shall each be a public office and the Governor and Deputy Governor shall respectively be Chairperson and Deputy Chairperson of the Board of Directors.

The Governor, the Deputy Governor or any other member of the Board may also be removed from office by the President under the following circumstances:

• Inability to perform the functions of his/her office arising from infirmity of body or mind;
• Misbehavior or misconduct;
• Incompetence.

The Board has vested the management and administration of the bank in:

1. Current Management Structure;
2. Board Committees;
3. Management Committees;
4. Functions and Departments

Monetary Policy

In July 2011, the Bank of Uganda reformed its monetary policy framework to meet the challenges of macroeconomic management generated by the transformation of the economy over the last 10 years, and in particular the rapid growth and diversification of the financial system. These reforms entail the transition to an inflation targeting lite monetary policy framework.

The primary policy objective of monetary policy remains unchanged: the control of core inflation over a medium term horizon. The reforms to the monetary policy framework are intended to strengthen implementation of Uganda’s medium term macroeconomic framework.

As part of the process of introducing an inflation targeting lite monetary policy framework, the Bank of Uganda will set an interest rate as the operating target of monetary policy. The interest rate will be called the Central Bank Rate (CBR) and will be used to guide 7 day interbank interest rates.

The CBR will be set once a month and will be publicly announced, so that it clearly signals the stance of monetary policy during the month. The CBR will be set at a level which is consistent with moving core inflation towards the BOU’s policy target of 5 percent over the medium term.

Annual core inflation stood at 12.2 percent in June, which is well in excess of the BOU’s policy target. The main reasons for the currently high rate of core inflation are supply side shocks which have driven up the prices of food and fuel, and the depreciation of the exchange rate, which has raised the domestic price of imports. Higher inflation in Uganda's major trading partners has also contributed to higher prices of imports.

Although the supply side shocks to inflation are likely to dissipate over the medium term, the Bank of Uganda is determined to prevent higher rates of inflation from becoming persistent and allowing expectations of higher inflation to take hold.

Consequently the Bank of Uganda intends to maintain a tight monetary policy stance, to curb demand for credit and thus dampen inflationary pressures over the next 6-12 months, so as to ensure that core inflation is pulled back towards the target of 5 percent.

To tighten monetary policy, the Central Bank Rate will be set at 13 percent for the month of July 2011. The BOU will use its daily secondary market operations in the money market to steer the 7 day interbank rate as close as possible to the CBR.

Click on the link below a presentation on Inflation Targeting, by Dr. Adam Mugume, Ag. Executive Director Research, Bank of Uganda. He made the presentation during an Inflation Targeting Monetary Policy Framework Seminar for Business Editors and Reporters on Thursday June 23, 2011 at Grand Imperial Hotel, Kampala.

Payment Systems

Payment systems refer to the rules, procedures, and mechanisms for transferring money between two or more financial institutions and their customers.

A national payment system is one of the principal components of a country’s monetary and financial system and is, therefore, crucial to a country’s economic development, since almost all economic transactions involve some form of payment.

Payment and settlement systems thus play a crucial role in a market economy, and central banks have always had a close interest in them as part of their responsibilities for monetary and financial stability. In light of this, Bank of Uganda provides a wide range of payment services for authorized financial institutions and the Uganda Government to facilitate the circulation of money in the economy.

Payment and Settlements Department (PSD) was created in 1998 to develop an effective, efficient and secure national payment system.

A properly functioning payments system among other things ensures distribution of liquidity in all sectors of the economy and allows transactions to be completed safely and on time.

Well-designed and managed payment systems help to maintain financial stability by preventing or containing financial crises, and help to reduce the cost and uncertainty of settlement, which could otherwise act as an impediment to economic activity. Payment and settlement systems therefore are to economic activity as roads are to traffic.

Consequently, an efficient payment system enhances the smooth and fast flow of funds for payment of goods and services. Today, the emphasis is on electronic transactions with higher velocity.

Useful links

Currency of Uganda:

Ugandan shilling

List of Central Banks:

Central Banks

Official website of Bank of Uganda:

www.bou.or.ug

Ministry of Finance, Planning and Economic Development:

www.finance.go.ug

Legislation/2000:Bank of Uganda Act:

www.bou.or.ug