Emmanuel Okware speaks with John Petley, the Senior Researcher at IIMR
Transcript: Emmanuel Okware speaks with John Petley, the Senior Researcher at the Institute of International Monetary Research (IIMR), on “The effects of COVID-19 on the Ugandan economy,” recorded in January 2026.
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Welcome everyone to our latest podcast in this series. My name is John Petley. I'm the Senior Researcher at the Institute of International Monetary Research.
And my guest today is Emmanuel Okware. He's a young economist. He's a member of the Applied Economics Association of Uganda.
(0:26 - 5:35)
He has a BA in Economics from Makerere University and a Postgraduate Certificate in Applied Research. He's currently pursuing a Master of Arts in Economic Policy and Management again at Makerere University. I first met Emmanuel because he enrolled as a student on one of the online courses we run here.
The course Money and Prices, an Introduction to Monetarism. It's good to have you with us, Emmanuel, and welcome. Anyway, it's been very interesting to have had a student do the course who's come from Uganda.
And I found your essay at the end of the course particularly interesting and particularly illuminating. And what we're going to be discussing this afternoon is how did Uganda cope with the coronavirus pandemic and its aftermath? We've published a lot in the Institute on how the more advanced economies such as the USA, the UK, the Eurozone, Japan handled it. There's lots of literature about that and lots of stuff from us about that.
But we haven't, there's a number of other countries that really, I think, most of us will probably have not much idea as to how they particularly coped with this crisis. So I'm going to ask Emmanuel now to tell us about the background to the coronavirus pandemic in Uganda. How did the government initially respond when news of this pandemic first hit the world at large?
Emmanuel Okware
Thank you, John.
It's a pleasure to have to speak to you and specifically to the Monetary Podcast. I think before I maybe give that background, I must mention that I've been a keen follower of the work of the Institute. No wonder, I had to enrol for the monetarism introduction course and also a keen reader of Professor Tim Congdon and a few others that I have come to learn about, Juan Castaneda and Steve Hankey and all who are aligned with monetarism.
I would like to just mention that I credit this to Professor John Hearn who actually advised me to take up the course before I just enrolled. So during that period, the government of Uganda, pretty much like all the other governments all over the world, reacted with some sort of containment measures and then they are followed a lot more about the emergency economic support. In Uganda particularly, on March 30th of 2020, Uganda enforced its first lockdown where schools were closed, places of worship were as well closed, non-essential businesses were as well closed and of course they restricted movement across the entire country.
Borders were shut, public transport was suspended and massive curfews were enforced as well. All of these were intended to limit community transmission of the coronavirus at that particular point in time. These measures were among the earliest and strictest in East Africa aimed at of course preventing the health system from being overwhelmed in that manner.
John Petley
So then, that's the general political situation. Now we come to the economics. What about the Central Bank? How did the Central Bank respond to society being essentially shut down?
Emmanuel Okware
Again, when the Central Bank reacted to COVID-19, it was more of a classic discretionary policy in which of course when the massive containment measures were taken into place, government was forced to do a lot of relief measures and fiscal measures in there and the Central Bank again was pushed into this kind of thing.
The Central Bank reacted in ways that showed that they were discretionary. They sliced the Central Bank rate, what you might call aggressive rate cuts, 14 months in succession. That is from 9% in February of 2020 all the way to 6.5 in April 2022 when inflation began to peep in and that's when they sort of released that.
Again, they didn't end there. There were several other credit relief measures that were introduced. For example, loan relief guidelines were given allowing supervised financial institutions to restructure their loans without really penalising the borrowers and as a result by mid-2021, over 7.7 trillion worth of loans had been restructured across the banking sector covering more than 40% of loan portfolios and that didn't really end there.
(5:35 - 7:46)
Of course, the Central Bank went ahead to purchase a number of treasury bonds from micro finance deposit taking institutions and even credit institutions. All of these were intended for liquidity to be injected into the economy and again as a result, credit to the private sector grew 11.5% year on year during that time, quite above the neighboring Kenya and Tanzania.
John Petley
It sounds fairly similar. Essentially, you're talking about the type of quantitative easing really, aren't you? [Yes]. But I found it very interesting you say that the central banks continue to cut the cost of borrowing right through until 2022. I think in certainly my country, the bank rate was cut very quickly in 2020 and there it sat, mind you, admittedly, it went down to pretty well to rock bottom.
So, there wasn't really any further scope for cutting but I found it interesting that whereas over here, the monetary action was fairly quick off the mark and it continued really right through until 2022. Did you start to see inflation picking up before the central bank ended its series of rate cuts?
Emmanuel Okware
Yes, particularly from my view, I started to see that inflation would get to a certain level given the fact that both the measures taken by the government, by the central government and the Bank of Uganda had introduced a certain surge, a huge surge in money supply. So, from my view, my theoretical view of the monetary analysis, I would see that inflation would really pick up before the central bank really did that.
John Petley
That's interesting. And what about the fiscal response? Over here, we had all sorts of people being helped in one way or other by actions of the government. We had a scheme whereby people who had to be laid off had most of their salaries paid for by the government up to 80% and that lasted for quite some time.
(7:47 - 9:27)
We also had schemes like Eat Out to Help Out where people were encouraged to go out and have meals, again, with subsidy from the government. Did you have any sort of fiscal response on these lines in Uganda?
Emmanuel Okware
Oh yes, we did have that sort of fiscal response from the government generally where it pushed central governments into more deficit spending and huge debt. But unlike the UK, Uganda did not really have a direct furlough scheme, say wage subsidies like the UK coronavirus maybe retention scheme.
Instead, the government here relied more on broader fiscal measures such as food relief, cash transfers, tax deferrals and to some extent, it even targeted livelihood programmes that tended to cushion the households and the businesses during that period of the pandemic.
John Petley
Did you see a surge in unemployment?
Emmanuel Okware
Yes, there was a surge in unemployment as a result. Of course, during the onset of the COVID-19, there were sectors that were largely affected, for instance, manufacturing, transport, tourism, and all of those laid workers off.
But also, there were these vulnerable groups of people that work on either daily salaries or weekly salaries around the city centre were all set off. So, all of those became unemployed. And as a result, we saw huge numbers of people unemployed, even during the era that COVID-19 had left, that level of unemployment still stayed.
(9:28 - 10:23)
And then we saw different other challenges. And these are some of the things that pushed government of Uganda into fiscal response or the economic support that they gave to the people during the time of the COVID-19.
John Petley
So, in 2022, there were still lots of people unemployed, the central bank was continuing to cut the cost of borrowing, inflation started to creep up. What happens once the inflation problem really became quite serious?
Emmanuel Okware
When inflation became serious, and it was inevitable, we were seeing all signs and the level of inflation was really getting high up. The central bank reacted in panic, just like several other central banks. Of course, a discretionary approach means you, human beings, transfer a panic into macroeconomic outcomes and even policy.
(10:23 - 13:55)
So, they responded with a panic during that time when inflation came in. And what happened was, again, they did massive raising of their central bank rate in that period. They rose the central bank rate to some months by 100 basis points and then 50 basis points.
And that rose within a short period of time, not the length of time they took cutting. So, it all rose sharply between June to October of 2022, back to 10% the central bank rate there. But that involved, of course, huge increases like 100 basis points, 50 basis points. Clearly, you would see that that's a sort of panic there from the central bank.
John Petley
They really slammed into reverse gear in quite a dramatic way then. And what was the result of that? I mean, even now into 2026, are the effects of what the central bank did, or indeed the effects of the coronavirus pandemic as a whole, still felt in any way? Or do you feel that your country's really got over it and is now back on a good path of growth?
Emmanuel Okware
No, I think the effects are still with us.
And this is because it's something that involved not just a single relief program or something that would easily be taken off. It involved borrowing, it involved restructuring and so many other things. So, the effects are clearly with us still.
While the health sector strength still continues, but also the learning gap. During that period, schools closed and we had a moment when the school gap really got disorganized. And so, it took universities an amount of time to really get back to the learning schedule that they really had.
But that's not very important. What is most important is the economic aspect where you have today, we have to carry on with fiscal pressures, of course, resulting from the borrowing during the time of the pandemic, but also resulting from the huge deficit spending that government undertook during that particular point in time. Today, and previous budgets after the COVID-19, we've seen huge amounts of money being used or being spent on literally paying off the debt and then servicing debt in general.
So, I think the effects are still with us and they will still be with us as for a meantime. But for the effect of inflation, I think inflation quite stabilized, given the fact that the central bank took measures that were really effective to that end.
John Petley
But you haven't actually suffered a recession as a result of the central bank's actions?
Emmanuel Okware
No, we haven't.
We haven't suffered a recession. I think we just came back to the right level. So, we haven't seen a recession yet.
And at the moment, from my view of the monetary aggregates, we are actually moving up. So, we didn't get to the level that it was recessionary. Prices quite stabilized early 2025, 2024, late 2024, and then even up now.
(13:56 - 14:46)
So, we are just seeing tendencies that it might again go up. Perhaps we're losing the monetary aggregate necessary for keeping the prices quite stable at the level we were at. That's the only worry at the moment.
Jonh Petley
What actually is the inflation target in Uganda?
Emmanuel Okware
Our inflation target is 5%. That's quite high compared to the UK.
John Petley
And what is the current inflation figure?
Emmanuel Okware
The current inflation figure as of last, the last figure was 3.3%.
John Petley
That's not bad. So, you've actually got a higher inflation target than we have in the UK, where ours is 2%. But actually, our inflation levels are pretty similar. So, the Central Bank of Uganda is doing a better job at keeping inflation down than the Bank of England.
(14:46 - 18:30)
So, that brings us on to the subject of central banks. The Bank of England has taken a lot of criticism for failing to spot the rise in inflation. Obviously, we here at the Institute and Tim and Juan in particular were warning about inflation in 2020.
And sadly, the Central Bank at the time didn't take a lot of notice. But as a result of that, it's certainly coming for a lot of criticism. How has been the reaction in Uganda to the actions of your central bank? Has that also been criticized as not having done a very good job or people just shrugging their shoulders and saying, well, okay, fair enough, they had to do what they did?
Emmanuel Okware
I think that the reaction of people toward the Central Bank would be the same if they were focused on the role of the Central Bank.
But looks like over here, they weren't. But again, during the time of the pandemic, the Central Bank deserved to be criticized, particularly for neglecting the money growth, given the policies pursued by both government and even the Central Bank. So, what it implied was that the Central Bank didn't quite understand the nature of the crisis.
And again, this brings me to this small phrase that understanding the crisis is really much more important than reacting to it, because that's what the Central Bank did. That's what the government did, it got us into a surge in broad money supply, and then ultimately, after the necessary lag, we had inflation. That, of course, after they reacted, it got better, and it's better now.
But again, Central Bank, the Bank of Uganda at that particular point in time during the pandemic deserved that criticism. Though today, we're doing better, like you've mentioned, we are within the inflation target, 3.3. But as again, I monitor, it looks like we're losing that monetary aggregate to keep it at that level. There might be a strain in the near future, which I'll be looking forward to.
But again, criticism, it's always there because the Central Bank of Uganda or Bank of Uganda has really been much of what other banks have done, discretionary approach, where you let things flow and then react to them. You let things happen and then react to them, rather than a much more easy to manage rules-based monetary policy. That's interesting.
John Petley
I mean, we have seen, at least from the Bank of England, some greater interest in monetary aggregates, obviously, broad money in particular, which is the important one. As a result, perhaps to some degree of the publications of the Institute, but sadly, we're not really seeing much interest in what we're doing in some of the other central banks that we follow. Do you see much hope for the Bank of Uganda taking a greater interest in monetary aggregates when it's looking to do its macroeconomic forecasting and planning? Or do you feel that rather like the majority of central banks in advanced countries, they're just not going to be interested in that neo-Keynesianism reigns as strongly in Kampala as it does in New York and Frankfurt?
Emmanuel Okware
I think the Bank of Uganda is in that loop, because something I've observed for a few times is they'll update everything, but the monetary aggregates will be updated last.
(18:30 - 19:59)
So you have to look for it on their website. It's not the same as the Bank of Kenya gives updates on their monetary aggregates, even when I think perhaps they don't really for it, but at least they do focus and they do give it as an update over there. The Central Bank of Uganda has focused so much on the central bank rate, the interest rate policy, rather than the monetary aggregates, and I think it's not going to be a quick thing to get it over that side.
I think the central bank will still remain on the interest rate policy for a significant time, unless otherwise we're able to speak, write as much and provide the evidence that you know you need to focus your attention or all your policies must be targeting money supply or aggregates over there. So I think pretty much like other banks, it's focused on interest rates policy.
John Petley
Thank you very much for giving us this very interesting insight into the handling of the coronavirus pandemic by the authorities in Uganda.
And I hope that for all our listeners, you've enjoyed listening to what is a most interesting and somewhat different from usual perspective on the pandemic. So thank you once again, Emmanuel, and all the best for your future work.
Emmanuel Okware
Thank you for having me, John.
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