President Museveni: Gulf Conflict Fuels Shilling Depreciation, High Fuel Prices

President Yoweri Museveni has identified international conflicts, particularly those in the Gulf, as the primary drivers behind the depreciation of the Ugandan shilling and the recent surge in fuel prices. Addressing the nation on Uganda’s 64th Independence Day, Museveni declared that the government would not utilize its foreign exchange reserves to artificially bolster the shilling’s value.

Instead, the President urged Ugandans to pivot towards domestic production and consumption. He emphasized that reducing reliance on imported goods and strengthening local manufacturing is the most sustainable strategy for insulating the economy from external shocks. This approach, Museveni believes, will empower Uganda to better navigate global economic challenges.

Museveni revealed that Uganda had previously secured a temporary arrangement with international commodities trader Vitol for petroleum products at reduced prices, a measure intended to buffer consumers from rising costs. However, this arrangement, designed with the hope of a swift resolution to the conflicts, has now expired as the global situation persists.

The Ugandan shilling has experienced significant pressure, weakening by over 11% against the US dollar since the start of 2026. This depreciation directly impacts the cost of imports, including essential fuel, machinery, and industrial inputs. The rising fuel prices, exacerbated by global supply chain disruptions and a recent excise duty increase, further contribute to increased transport and general living costs.

President Museveni disclosed that he rejected a proposal from the Bank of Uganda to sell foreign exchange reserves to ease currency pressure. He reiterated his call for increased domestic consumption, suggesting it as a means for citizens to mitigate the impact of a weaker shilling on their daily expenses. The government’s focus, therefore, remains on building domestic economic resilience rather than relying on currency interventions.

Additionally, Museveni cited the Ebola outbreak as a factor impacting economic activities like travel and tourism. International financial institutions, including the IMF, have also flagged the Middle East conflict and the Ebola outbreak as significant risks to Uganda’s economic outlook, warning of potential inflationary pressures. Despite these challenges, Uganda has seen robust economic growth, with the IMF noting a strengthening in real economic growth in the first half of the 2025/2026 financial year.

Source: Nile Post