The Independent Uganda: You get the Truth we Pay the Price
COMMENT | WILSON MANISHIMWE | The Uganda Shilling has experienced a sharp depreciation over the US Dollar recently, driven primarily by escalating international political tensions, a spike in global oil prices and intense dollar demand from corporate sectors.
Available data indicates that the exchange rate hit UGX 3,920 per US dollar by September 2026, up from an average mid-rate of UGX 3,605 earlier in the cycle. When the Ugandan shilling loses value, it might sound like a story for bankers, forex traders and economists, but the effects eventually reach ordinary Ugandans through prices of fuel, food, medicines, vehicle spare parts and other goods.
Take an example of a trader importing goods for USD 10,000; at UGX 3,700 to the dollar, the shipment costs UGX 37m. If the exchange rate moves to UGX 3,900, the same goods require UGX 39m. Nothing has changed about the shipment yet; the trader needs more shillings to buy the same dollars.
The trader has to decide whether to absorb the loss, reduce the profit margin or raise the selling price. Many times, the consumer ends up paying the difference, although the price elasticity of demand applies depending on how essential the commodity is. And that’s how depreciation moves from the forex market to the local market.
According to Finance Ministry August 2026 Performance of Economy report, Uganda’s total merchandise import bill stood at USD 1.612b (approximately UGX 5.9Trillion) in June 2026 and key imports included vegetable products, beverages, petroleum products among others.
This implies that when the shilling weakens, these products become more expensive in the local currency, and the effect can spread through the economy. Take an example: a boda boda rider may have to spend more on fuel and maintenance, and to protect his income, he may increase fares; hence, the passenger feels the impact in daily transport costs.
But Uganda shilling depreciation doesn’t hurt everyone equally. Exporters benefit because their dollar earnings translate into more Ugandan shillings. An exporter earning USD 100,000 would receive UGX 370m at the exchange rate of UGX 3,700 per dollar, compared to UGX 390m at the exchange rate of UGX 3,900 per dollar.
That benefit, however maybe reduced if the exporter depends on imported fertilizer, machinery, packaging or other dollar priced inputs. The same applies to businesses with dollar loans, a USD 1million loan taken when the exchange was UGX 3,600 is equivalent to UGX 3.6b. At UGX 3,900 per dollar, the same debt is worth UGX 3.9b in terms of shillings because the shilling value of the obligation has increased by UGX 300m.
But the bigger challenge is structural; Uganda needs dollars to pay for imports, while our main sources of foreign exchange are exports, tourism, remittances and investment. If the imports continue growing faster than export earnings, the pressure on the shilling will remain.
The long-term answer is therefore not simply to watch the exchange rate. Uganda must produce more, export more and add value to the exports. Coffee provides a good example; instead of exporting mainly raw beans, Uganda can earn more by investing in roasting, packaging and branding. The same opportunity exists in milk, fruits, cocoa, cotton and other products.
A stronger productive based would create more jobs, earn foreign exchange and reduce dependence on imported goods where local production is viable. The cost of exchange rate is not just a number displayed at a forex bureau, it affects the cost of running a business, transport and running a household.
If Uganda wants to build a more resilient shilling, the bigger task is to build an economy that produces more, exports more and keeps value at home.
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The author is a Policy Analyst
