Government Asks Public to Remain Calm as Shilling Faces Forex Pressures

The Ugandan government has called for calm among citizens, urging the public to steer clear of panic buying of foreign currencies and rumor-driven speculations that exacerbate pressure on the local shilling.

Presenting an economic update to Parliament, the Minister of State for Finance, Planning and Economic Development, Hon. Henry Musasizi, explained that the administration is backing monetary policies with strict expenditure restraint and targeted budgeting. The Bank of Uganda has responded to the volatility by tightening monetary conditions, lifting the Central Bank Rate to 12 percent and increasing commercial banks’ cash reserve requirements to 13.5 percent.

According to the ministry, the ongoing pressure on the shilling stems largely from an imbalance between foreign exchange supply and demand. Net foreign-exchange demand originating from the energy sector alone surged from US$360 million to US$620 million year-over-year. This jump has affected domestic fuel prices and strained importation costs. To counter this, the government plans to foster a competitive petroleum market to ensure uninterrupted fuel supplies and steady consumer prices.

Additional strain has come from declining global prices for agricultural exports like coffee and cocoa, alongside temporary tourism setbacks caused by health-screening measures. Lawmakers weighed in with various proposals during the debate. While some MPs suggested improving diplomatic outreach to confirm Uganda’s Ebola-free status and revive tourism, others cautioned against depleting national reserves. Proposals were also made to bolster reserves through gold acquisitions and to improve relations between tax authorities and the business community.

Read more details on the Parliament of Uganda.