Challenges of Monetary Policy Communication:

Bank of Uganda Experience

By Kelvin Kizito Kiyingi

October 2012

Introduction

Who is Kelvin Kizito Kiyingi?MABJ, Reuters FellowCity University of New YorkPost Bank, Communication Manager U.S. Embassy Kampala, Information Assistant Bank of Uganda, Assistant Director,

Communications Department

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Outline

Monetary Policy Decision Making at BoU

Content and Structure of BoU’s Monetary

Policy Communication

Background: New Monetary Policy Framework

Challenges

Conclusion04/08/2023 3

New Monetary Policy Framework

In July 2011, Bank of Uganda introduced Inflation Targeting lite (ITL) monetary policy framework, replacing monetary aggregate targeting.

ITL more discretion on the part of policy makers than monetary aggregate targeting.

Therefore, credibility and transparency play important roles

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New Monetary Policy Framework

Sensitization workshops/seminars for key

stakeholders.

Use of the policy rate, the Central Bank Rate.

High Inflation, Depreciating Exchange Rate.

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Monetary Policy Decision Making at Bank of Uganda

Daily Financial Markets Operations Sub-Committee Meeting Chaired by Deputy Governor

Technically this committee does not make monetary policy decisions, it only implements

Weekly Monetary Policy Committee (MPC) Meeting Chaired by Governor

Key Monthly MPC which sets CBR, key meeting for taking decisions

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Monetary Policy Communication Functions

External Communication Enhance the effectiveness of Monetary Policy

decisions Contribute to the credibility of Central Bank

Internal Communication Build a better understanding amongst Central

Bank staff, management and board

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Content & Structure of BoU’s Monetary Policy Communication

Monthly Monetary Policy Statement

One hour after MPC In-depth

explanation Forecast of inflation Media engagement Media with EDR

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Content & Structure of BoU’s Monetary Policy Communication

The Media Publishing the Monetary Policy

Statement verbatim in key newspapers Placing articles in the press Talk shows both on Radio & Television Press interviews

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Content & Structure of BoU’s Monetary Policy Communication The Media Since the introduction ITL, the media devotes

much more attention to monetary policy. CBR is “visible” in a way that monetary

aggregates are not Everybody knows/sees interest rates.

Therefore bound to attract more attention

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Content & Structure of BoU’s Monetary Policy Communication

Website Social Media Statements Policy Reports Exchange

Rates

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External Tools

Monetary Policy

Website

Media Training

Money Museum

Outreach Programmes

Monetary Policy Reports

Placements

Monetary Policy Statements

Radio/TV Talk Shows

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Internal Tools

Intranet• Statements• Rates

E-mails• Interpretations• Information

Exchanges• Knowledge

Sharing • Internal Forums

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Challenges of Monetary Policy Communication

Language Official/business language is English The functional literacy in English is

limited Over 40 languages in Uganda

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Challenges of Monetary Policy Communication

Lack of informed debate Low economic and monetary literacy

levels Little understanding of the demand

management concept: Private Consumption; Private Investments; Government Spending; Exports

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Challenges of Monetary Policy Communication

Lack of informed debate contd. Lack of understanding of BoU’s role amidst a

liberalised environment Failure to understand difference between

monetary and fiscal policy Relationship between interest rates, exchange

rate and inflation

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Challenges of Monetary Policy Communication

Lack of informed debate contd. Limited knowledge what macroeconomic

policy can do and cannot do Paucity of independent institutions which can

contribute informed analysis, forecast etc...

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Challenges of Monetary Policy Communication

Website & Social Media Limited bandwidth Internet Access Social hubs, You tube No Mobile phone version of BoU website

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Challenges of Monetary Policy Communication

(Play a video from BoU website: Optional)http://www.youtube.com/watch?v=JqmyKA8s

f0I&feature=player_embedded#t=20sVideo Slide: A Clip of Governor, Bank of

Uganda, Professor Emmanuel Tumusiime-Mutebile, addressing a press conference at which the Monetary Policy Statement for September 2012 was issued.

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Challenges of Monetary Policy Communication

The Media Lack of qualified business journalists Limited interpretative reporting Business sections are heavily influenced

by advertising from big companies

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Challenges of Monetary Policy Communication

Dual Role Perhaps the biggest challenge informing and

educating concurrently Lack of monetary policy communication capacity Under the ITL framework, convincing the public

what will happen over the next few months Convincing the public the most likely outcome and

therefore the interest rate decision is the most correct one.

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Challenges of Monetary Policy Communication

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During tough times

Some want both low interest rates, low inflation and a strong shilling at the same time.

Deputy Governor wrote

Proposed Solutions Monetary Policy Fact Sheets: Once a year, to

use as publication for guests and for induction. (Internal and External)

Recordings of press conferences and posting the entire transcript on the website

Live broadcast (internet, television and radio)Coverage of press conferences

Monetary Forums (already in use in Kenya) Introduce Monetary Policy School/University

Challenges (already in use in South Africa).

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ConclusionFor effective communication of monetary policy I

recommend five main things: Use of more local languages Concerted and continuous media training Continuous public awareness initiatives Re-positioning of the website We are entering a new era with ITL, which requires a

much more complicated communication approach. We should not be afraid of debate; we should

stimulate public debate.

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Questions

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