A currency crunch is testing Uganda's economic defenses. The shilling has slumped to historic lows this year, falling from about UGX3,623 per dollar in January to levels above UGX4,000 in October. On October 12, it touched UGX4,143, its weakest nominal rate since 1993. Brief spikes near UGX4,500 on October 23 showed just how volatile trading has become, even as later readings put the rate closer to UGX4,245 by October 30.
The shilling's slide has turned historic, plunging from UGX3,623 to its weakest nominal rate since 1993.
Reuters calculated the shilling's loss at nearly 15% against the dollar since June. That's a steep slide for a currency that traded near UGX3,614.50 at the end of 2025. September alone brought a 3.7% monthly drop, averaging UGX3,869, before the October break above UGX4,000.
Behind the slide sits a widening current-account gap. Uganda's deficit reached US$4.6 billion in the 12 months to August, US$1.4 billion wider than a year before. Imports of US$2.31 billion outpaced exports of US$1.49 billion that month, leaving an US$817 million shortfall. Fuel costs have been a major drag, with US$1.6 billion spent from January through August, up sharply from US$1.1 billion a year earlier.
Coffee, a key export earner, didn't help. August earnings fell 10.9% to US$182 million as drought hurt harvests. Gold exports brought in US$889 million, about 60% of August's export total, but that wasn't enough to offset weaker crop and tourism receipts alongside rising fuel bills.
Bank of Uganda reserves stood near US$6.9 billion on October 23, up from roughly US$2.7 billion in FY2022/23. Still, that's under four months of import cover, short of the bank's 4.5-month target. The IMF put reserves at US$6.1 billion at end-May, or 2.7 months of cover, while the central bank's August report showed US$6.7 billion at end-June, or 3.7 months.
The IMF flagged another wrinkle: some reserves stem from temporary cross-currency repo deals, which carry rollover risk and complicate true liquidity readings. Unlike widely traded currencies such as the South African Rand, which benefit from deep liquidity and active global trading desks, the shilling's thinner market makes it more prone to sharp, sentiment-driven swings.
Markets will likely watch whether oil exports, expected in the second half of 2026, can ease pressure. Investor flows into Uganda's bond market, previously supportive, remain another variable worth tracking.
