- Uganda's shilling touched UGX 4,500 per dollar on October 23, its weakest nominal point in over three decades, losing more than 11% in a single month
- The Bank of Uganda raised its Central Bank Rate by 225 basis points to 12% in an emergency meeting, marking the largest rate hike by any central bank this year
- President Yoweri Museveni rejected a central bank proposal to deploy foreign reserves to defend the shilling, citing concerns over subsidising non-essential imports
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Uganda's shilling recorded its worst nominal performance in more than 30 years.
Source: UGC
This is after it briefly reached UGX 4,500 per dollar on October 23, 2026, before closing the week at approximately UGX 4,429 per the Bank of Uganda's counter rates.
Bloomberg quoted a Friday close of UGX 4,419.95, while the mid-market rate on October 27 stood at around UGX 4,480, according to Wise.
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The currency has shed more than 11% of its value this month alone, ranking it as the world's second-worst-performing currency against the dollar after Iraq's dinar.
The slide began around July 2026, when the shilling was trading at roughly UGX 3,709 per dollar.
A combination of surging petroleum imports, outflows from local-currency government securities by offshore investors, and elevated energy-sector demand for foreign exchange have all weighed heavily on the currency.
What Is Driving the Shilling Lower
Bank of Uganda research chief Adam Mugume pointed to speculative dollar buying as a key aggravating factor, noting that excess liquidity in the local market was enabling businesses and investors to accumulate dollars and blunting the central bank's ability to intervene effectively.
"The speculative side seems to be stronger than the fundamental," Mugume said on Capital FM's Capital Gang programme on October 24.
Uganda Bankers' Association chief economist Enock Nyorekwa Twinoburyo noted that net foreign-exchange demand from the energy sector surged to $620 million in the three months to September, up from $360 million a year earlier, partly driven by higher global oil prices.
Uganda's merchandise imports also jumped to $2.31 billion in August 2026, a 66.5% rise year-on-year.
Government's Emergency Response
The Bank of Uganda has tightened policy on two fronts. In September, it raised the cash reserve requirement for commercial banks from 11% to 13.5%.
On October 14, it convened an emergency Monetary Policy Committee meeting and raised the Central Bank Rate by 225 basis points to 12%, the steepest rate hike by any central bank globally this year.
Governor Michael Atingi-Ego cited inflation risks as justification, with Uganda's headline inflation rising for a sixth consecutive month to 4.6% in September and projected to reach 7–7.5% over the next 12 months. The central bank also returned to direct dollar sales to commercial banks on October 22.
On the fiscal side, the Finance Ministry has cut planned operational spending for the October–December quarter by nearly UGX 3 trillion ($682 million), instructing government agencies to halve expenditure on fuel, travel, workshops and similar non-essential items.
Permanent Secretary Ramathan Ggoobi said the restrictions were designed to contain inflation and ease pressure on the exchange rate.
Museveni blocks central bank proposal
President Yoweri Museveni, however, blocked a central bank proposal to draw down foreign reserves to ease dollar shortages.
Speaking at Uganda's 64th Independence Day celebrations at State House Entebbe on October 9, Museveni said:
"The governor was suggesting that he spends our dollar reserves to bring the dollar price down and I don't agree with it. It is not correct to squander our dollars."
He argued that reducing imports of non-essential goods would do more to ease forex demand than reserve intervention.
Uganda's reserves stood at $6.7 billion as of June 2026, covering roughly 3.7 months of future imports, below the Bank of Uganda's own four-month target and the 4.5-month benchmark recommended by the East African Community.
Fuel prices have already crossed UGX 7,000 per litre in parts of the country, with diesel inflation climbing to 42.5% year-on-year in September.
Source: TUKO.co.ke