The Central Bank under the BOU Act 2000, is mandated to issue securities on behalf of Government to the public. The public may rediscount their securities at BoU at an interest rate known as the Rediscount Rate. In the same Act, Bank of Uganda (BOU) is required to extend loans to commercial banks for a period not longer than three months at an interest rate at least one percentage point higher than the Rediscount Rate. This interest rate is known as the Bank Rate.
The short term borrowing is collateralized by government securities, that is, Treasury bills and bonds. The BoU fully adheres to the law that requires the central bank to fix and make public at all times its standard Rediscount Rate. Effective July 2011, the derivation of the Rediscount and Bank Rate is pegged to the monetary policy’s signaling rate- the Central Bank Rate (CBR).