Uganda faces economic pressure from inflation and currency depreciation

Uganda is experiencing significant economic strain driven by rising inflation, a weakening shilling, and a widening trade deficit. Annual headline inflation rose to 4.6 percent in September 2026, fueled by increased costs for food, transport, and energy. In response to these inflationary pressures and the depreciation of the shilling, the Bank of Uganda raised the Central Bank Rate to 12.0 percent.

The Ugandan shilling has reached its weakest level since 1993, pressured by rising US bond yields and foreign investor withdrawals. With foreign exchange reserves at approximately $6.7 billion—covering roughly three months of imports—the country has limited capacity for direct market intervention. President Yoweri Museveni has urged a focus on increasing exports and tourism rather than utilizing reserves to support the currency.

Despite these challenges, Uganda’s export revenues saw a 36 percent year-on-year increase in August 2026, reaching $1.5 billion, largely due to a 69 percent surge in gold exports. Additionally, the Bank of Uganda has entered a cooperation agreement with EIB Global to strengthen the financial sector's ability to manage climate-related risks and attract green investment.