CENTRAL BANKS EMBRACE CLIMATE ACTION IN MONETARY POLICY
By Veeta Mbejjo, Kampala, January 23, 2025 | Econews
As the effects of climate change increasingly disrupt economies worldwide, central banks are ramping up efforts to integrate climate considerations into their monetary policies. Recognising the profound risks environmental changes pose to financial stability, these institutions are rethinking their strategies to secure sustainable growth and economic resilience.
Today in Kampala, a high-level panel discussion titled “Climate Change and Monetary Policy: A Conversation with Central Bankers” brought together global experts to address the critical interplay between climate risks and monetary policy. Organised by the Bank of Uganda (BoU) in collaboration with the International Monetary Fund (IMF), the event highlighted the growing urgency of aligning monetary frameworks with climate realities.
Speaking at the panel, Dr. Michael Atingi-Ego, Deputy Governor of the BoU, underscored the importance of adapting central bank approaches to an evolving world. “Our mandate remains unchanged,” he stated, “but our tools and policies must evolve to address the pressing challenges of climate change. This is about securing financial stability while ensuring a sustainable future for our economies.”
The panel was part of a broader BoU-IMF workshop on climate change modelling, a multi-day event drawing participants from over 25 countries. The workshop focuses on equipping central banks with the tools and knowledge to navigate the complex nexus of climate change and monetary policy. Topics discussed include developing robust climate data systems, integrating climate risk assessments into policy models, and implementing actionable strategies to mitigate economic vulnerabilities.
Climate change presents unique challenges to monetary policy, particularly in countries like Uganda, where agriculture—a climate-sensitive sector—forms the backbone of the economy. Extreme weather events, unpredictable rainfall, and rising temperatures threaten food production, inflation trends, investment patterns, and infrastructure stability.
Central banks are increasingly recognizing that these disruptions can have long-term consequences on price stability and economic growth. Central banks can preemptively address these challenges by integrating climate risks into their monetary policies and foster resilience across economies.
Dr. Atingi-Ego highlighted the importance of international collaboration in this effort. “This workshop is a platform to share practical experiences and learn from the successes and challenges of other central banks. Together, we can build more resilient and sustainable economies.”
The initiative also emphasizes the critical role of data. Reliable climate data and advanced modelling techniques are indispensable for accurately forecasting the economic impacts of climate change. These tools allow policymakers to anticipate risks, craft informed interventions, and build adaptive policy frameworks.
For Uganda, aligning monetary policy with climate considerations is not just a necessity—it is an opportunity. By proactively addressing climate risks, the country can safeguard its financial systems, strengthen its economy, and contribute to the global agenda for sustainable development.
The BoU-IMF workshop represents a crucial step in this journey, equipping policymakers with the skills and insights needed to face a rapidly changing world. As Dr. Atingi-Ego aptly noted, “The decisions we make today will determine the resilience of our economies tomorrow. Climate action is not an option; it is a responsibility.”
The workshop will continue throughout the week, fostering dialogue and collaboration among central banks worldwide. With climate risks now a central concern for economic policymakers, institutions like the Bank of Uganda are leading the way in integrating sustainability into their core mandates—ensuring that financial stability and environmental stewardship go hand in hand.
