Bank of Uganda doubles surplus as cash demand holds firm
The Bank of Uganda (BoU) doubled its financial surplus to UGX1.32 trillion (about US$367 million) in the financial year ended June 2026. Stronger interest earnings, tighter cost controls and better returns on its foreign exchange reserves offset rising monetary policy costs and external economic pressures.
According to the central bank’s financial performance results, which were signed off by auditor general Edward Akol, net operating income rose by 24% to UGX1.91 trillion (about US$531 million). Its cost-to-income ratio stood at 47.5%, well below its 75% target.
The results came against a backdrop of geopolitical tensions, foreign exchange pressures and increased interventions to manage liquidity in the financial system.
“These results reflected budget discipline, prudent expenditure management and responsible deployment of resources, while recognising that monetary policy operations carry financial costs,” said Augustus Nuwagaba, deputy governor of BoU.
Interest earnings were the biggest contributor, at UGX1.92 trillion. Returns from the bank’s expanded foreign exchange reserve portfolio came to UGX642 billion, and interest income from advances to government and government securities added UGX1.102 trillion.
Interest costs linked to monetary policy and liquidity-management operations reached UGX327 billion. Excluding these, total expenditure rose by 11% to UGX736 billion, driven mainly by employee benefits and general administrative costs of UGX445 billion.
Richard Byarugaba, executive director of finance at BoU, said the bank had managed competing financial demands while keeping operational discipline.
“Performance was achieved despite geopolitical tensions, foreign exchange pressures and increased monetary policy and liquidity-management interventions. Although these interventions increased interest costs, the bank maintained expenditure discipline and contained controllable costs within approved budgets,” Byarugaba said.
The bank’s balance sheet also strengthened. Total assets grew by 21% to UGX38.7 trillion, supported by a 46% increase in foreign assets. Foreign exchange reserves climbed 56% to US$6.688 billion, and shareholders’ funds rose by 25%.
BoU named risk management, digital transformation, staff development and operational resilience as its key priorities for the 2026/27 financial year. Its risk management measures include risk registers, key risk indicators, cyber security controls and incident-management arrangements.
Cash demand persists
The value of money in circulation rose by 12% to about UGX10 trillion by the end of June 2026. BoU said this reflected continued demand for cash despite the growth of digital payment channels.
Banknotes accounted for most of the increase, rising by UGX1.073 trillion, while coins grew by UGX5.2 billion. During the year, the bank issued UGX14.2 trillion in banknotes: UGX4.6 trillion in new notes and UGX9.6 trillion in reissued notes. The central bank credited its banknote sorting processes for the high share of reissued notes, because fit notes are returned to circulation and fewer new ones need to be printed.
Governor Michael Atingi-Ego said inflation stayed below the bank’s 5% medium-term target throughout the year, supported by monetary policy and favourable domestic supply conditions.
During the period, the Monetary Policy Committee held the Central Bank Rate (CBR) at 9.75% and raised the cash reserve requirement from 9.5% to 11% to absorb excess liquidity.
Conditions later changed sharply. The bank raised the CBR by 225 basis points and lifted the cash reserve ratio to 13.5% to restrict the amount of money available for private-sector lending. It cited the escalating conflict in the Middle East, falling export prices and slower tourism earnings as emerging external pressures.
BoU said it will focus on sustaining earnings growth, strengthening cost and risk management, improving resource use and maintaining adequate capital and liquidity buffers.
“Preserving confidence in the value of currency remains the BoU’s foremost responsibility,” Atingi-Ego said.
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