Government Urges Calm as Ugandan Shilling Faces Foreign Exchange Pressures

The Ugandan government has appealed to the public to remain calm and steer clear of speculative foreign currency transactions that exacerbate short-term pressures on the local shilling.

Presenting an economic state address, Minister of State for Finance, Planning and Economic Development Henry Musasizi noted that authorities are closely supporting monetary policy through strict expenditure restraint and careful budget prioritization. To stabilize the currency, the Bank of Uganda has ramped up monetary tightening by elevating the Central Bank Rate to 12 percent and raising commercial banks’ cash reserve requirements to 13.5 percent.

According to the finance ministry, the primary driver behind the local currency’s volatility is a growing imbalance between foreign exchange supply and demand. Net foreign exchange demand from the energy sector alone surged significantly, climbing from US$360 million to US$620 million over the corresponding periods. This surge, alongside international petroleum costs, has placed strains on fuel importation and consumer pricing.

Furthermore, foreign exchange inflows have faced temporary constraints due to softening global prices for key agricultural exports like coffee and cocoa. Tourism receipts have similarly experienced setbacks stemming from international health-screening measures and travel restrictions. In response, lawmakers during the parliamentary session proposed various remedial strategies, ranging from enhanced diplomatic campaigns to clarify the country’s health status for tourists to improved taxpayer relations through the Uganda Revenue Authority.

Government officials have emphasized that national reserves will be managed cautiously while prioritizing essential growth sectors such as agro-industrialisation, mineral development, and tourism to bolster long-term economic resilience.

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