BoU Governor, Michael Atingi-EgoBy Prisca WanyenyaBank of Uganda (BoU) has admitted it has no control over the high interest rates charged by commercial banks, blaming the rates on Government’s high appetite for domestic borrowing.BoU Governor, Michael Atingi-Ego made the revelation while appearing before Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) on September 7, 2026, during consideration of the Auditor General’s December 2025 report.“Bank of Uganda does not have control over that. It needs financial sector reforms, deepening of other markets as well and these are things we have in our plans. So, we cannot go dictating that banks must charge 10%. We don’t have capacity to understand their cost structures. For each bank we would have to look at the cost structures and say you must charge this, that would be asking too much,” Atingi-Ego said.He was responding to a question by Christopher Bakashaba (Mbarara North Division) on measures BoU is undertaking to curb exorbitant lending rates.Atingi-Ego defended the Central Bank’s non-intervention, citing Uganda’s liberalized economy policy adopted in 1993 where prices are determined by demand and supply, including in financial markets.“We need to understand why interest rates are high in Uganda. First, interest rates are high because of excessive Government borrowing from the domestic financial system. Secondly, because of costs of resources held up in commercial courts. Thirdly, the amount of domestic arrears Government owes to Ugandans is also high. Some of these people borrowed from commercial banks and cannot pay,” he said.He explained that when banks price loans, they factor in non-performing loans (NPLs). Uganda’s NPLs have been high, and when BoU requires banks to provision for them, they need more capital which is expensive.On reducing rates, Atingi-Ego said Government needs to reduce court cases that hold up money and reduce domestic borrowing.“There are certain factors we are trying to address through financial sector reforms, deepening capital markets to mobilise long-term financing so that when you want to build a school, you get a fair interest rate, not a commercial rate for building a school. The commercial rate should be left for working capital,” he said.45% of Tax Revenue Goes to Debt ServiceWhile acknowledging concerns that Uganda’s public debt has surpassed 50% of GDP, Atingi-Ego said the ratio is manageable as GDP can support it. However, he warned that debt service to tax collection ratio is worrying.“The debt rate now is concerning, particularly in terms of debt service, but projections for fiscal consolidation are encouraging. It means for every one shilling URA collects, about 45 cents go to debt service. Interest payment alone is quite significant, close to about 23.5% of total revenues,” Atingi-Ego said.He attributed high interest payments to the changing debt composition where domestic debt now exceeds external debt share, yet domestic interest rates are much higher than external debt rates.Fraudulent Payments, Not HackingOn theft and money transferred to wrong accounts meant for debt repayment, the Governor declined to comment publicly to avoid prejudicing ongoing court cases.“Where a specific request touches on active litigation or institutions under our supervision, we will seek the committee’s guidance on sharing information in a manner that safeguards parliamentary oversight without prejudicing legal proceedings or financial stability. First of all, there was no hacking in Bank of Uganda, there were fraudulent payments, those are different issues. So, any matter to do with fraudulent payments, we are not going to answer publicly, but we can do it in confidence,” he said.The post BoU Blames High Interest Rates on Govt Domestic Borrowing as 45% of Tax Revenue Goes to Debt Service appeared first on Business Focus.