Uganda shilling depreciation and monetary response

The Ugandan shilling has experienced significant depreciation, losing approximately 6% in mid-September 2026 and over 11% throughout the year. This volatility has been attributed to fluctuating global oil prices, declining tourism receipts, and reduced export earnings.

In response to the currency slide, the Bank of Uganda initially raised the Cash Reserve Requirement (CRR) for commercial banks to 13.5% to reduce local currency availability for foreign exchange trading. Governor Michael Atingi-Ego expressed confidence in the central bank’s ability to stabilize the rate, citing successful management of similar pressures in previous years.

However, President Yoweri Museveni later rejected a proposal to utilize the nation’s foreign exchange reserves to defend the currency, stating, “It is not correct to squander our dollars.” The President advocated for import substitution, urging a shift toward locally manufactured products to reduce reliance on foreign goods. He also noted that current currency pressures are influenced by international fuel price increases driven by conflicts in the Gulf and potential impacts from the Protection of Sovereignty Bill.

In October 2026, the Bank of Uganda’s Monetary Policy Committee implemented its largest single rate increase since 2011, raising the Central Bank Rate (CBR) by 225 basis points from 9.75% to 12.0%. This tightening aims to defend the shilling and curb inflation, which is expected to reach between 7.0% and 7.5% over the next year. The bank cited geopolitical tensions in the Middle East as a driver for higher oil and freight costs. This policy shift coincides with a downward revision of Uganda’s FY2026/27 economic growth forecast to 6.0%-6.5%.