Ugandan shilling loses value rapidly

The Ugandan shilling has lost significant value over the past seven months, moving from about 3604 shillings per US dollar in March 2026 to around 4500 by late October 2026. This sharp decline has raised concerns about economic stability and purchasing power for Ugandans.

Causes of the currency depreciation

The depreciation is linked to increased demand for foreign currency, driven by rising international oil prices, geopolitical tensions in the Middle East, and higher maritime transport and insurance costs. These factors have made foreign currency more expensive and less available in local markets.

Government and central bank respond

The government and the Central Bank of Uganda have introduced measures to stabilize the shilling. These include raising the policy rate to 12 percent and increasing commercial banks' cash reserve requirements to 13.5 percent from 11 percent. These steps aim to reduce the amount of money in circulation and encourage savings.

Financial discipline urged

Minister of Finance Henry Musasizi announced plans to tighten monetary conditions and cut non-essential public spending, including travel, workshops, and administrative costs. He emphasized the need to protect essential public services and development projects while urging households and businesses to avoid panic buying of foreign currency and speculative transactions.

Impact of global market trends

The depreciation is also influenced by falling global prices for Uganda’s key agricultural exports, such as coffee and cocoa, and a drop in tourism revenue. These factors have temporarily reduced the country’s inflow of foreign currency, affecting its balance of payments.

Inflation and fiscal challenges

Annual inflation in Uganda rose to 4.6 percent in September 2026, up from 4.1 percent in August, with energy, fuels, and public services seeing a sharper increase of 14.5 percent. Nearly 40 percent of the 2026/2027 fiscal year budget is allocated to debt servicing, putting pressure on public finances.

Focus on international reserves

The government has stressed the need for careful management of international reserves to handle market disruptions while ensuring the country can meet its external obligations. This approach aims to maintain confidence in the economy and support long-term stability.