Let us understand the current relationship between USD vs. SH on Uganda’s economy
Marketing Uganda generally and specifically is penultimately and ultimately vital for our country Uganda. This is over and above tourism marketing. It involves all efforts to position Uganda for exports, FDI, tourism, diaspora and remittances, sports, relations with target countries/markets and international organizations, writes Elly Twineyo Kamugisha
Elly Twineyo Kamugisha. (File)
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OPINION
By Elly Twineyo Kamugisha
Uganda’s economy has been growing and resilient, despite the prevailing effects of Covid, recently Ebola, and other challenges externally imposed on our economy such the effects of wars in Ukraine and Iran. During 2025/26, the economy grew above 6.4 percent; and the economic outlook shows a projected positive economic growth above 10.2 percent in FY 2026/27. HE the president informed the public that Uganda economy is projected to exceed USD 74 billion by June 2027 as the economy moves towards USD 500 billion by 2040.
During 2025/26, total exports (goods and services) reached USD 18.4 billion; foreign direct investments inflows reached USD 3.7 billion; tourism receipts accounted for USD 1.62 billion; and remittances accounted for over USD 2.5 billion.
There is a challenge on our hands regarding the UGX. Vs USD. The US dollars has gone way upto where it has never been in the history of Uganda. Some saying this has never happened in the last 33 years. It is above 4,000 UGX to 1 US dollar! As a related a factor, fuel has also moved towards UGX. 10,000/- for one litre.
Other related costs are going up too much. Food items are moving up because of the influence of the dollar. Those who are paying rent in dollars are likely to default. Others who are using services whose providers are charging in dollars are likely to move away from consuming some of these services. Meanwhile, MPS (members of parliament/national legislature) are talking some politics with bits of the economy: some are saying that the Government should inject around USD 200 million in the market to cool-off the heat; others are following the ‘let’s keep watching the market’; and others are indifferent. The public is asking that “twaggala Gavementi etuyambe (that Government please help us out of this situation).
At this time, most high-level Government (Finance Ministry; BOU, NPA; Ministry of Trade; and indeed, all Cabinet as the Executive of the country) are in meetings and talking.
HE the president, with hindsight, has said Government will not use its forex reserves (estimated above USD 6.7 billion?) at BOU to buy excess dollars on our currency market. Given H.E. guidance, BOU has decided not to buy USD cash from the market. Instead, BOU has raised the monetary instrument of lending from 11 % to slightly above 13%.
We always use our dollars as country to buy imports; among others. Some imports are highly required for our economy in manufacturing and processing; and exports. We import petroleum products, machines, spare parts, and raw materials for our factories (e.g., in the iron and steel sector we import raw materials of iron and steel). However, we also import a lot of consumer goods that ultimately will require import substitution.
We get forex from exports, foreign direct investments, tourism, remittances, Government investments abroad, Government sales abroad, aid/grants/projects, and sometimes NGOs (grants; others).
Issues affecting our economy and SH. Vs USD relationship:
- Wars outside of Africa affecting global economy mainly the wars in Ukraine with Russia and USA and Israel in Iran. Go and look at the water corridor called the Straits of Hormuz and its effects on the movement of petroleum products and fertilizers. This Strait handles 20 percent of global fuel products.
- Behaviour and decisions of institutional investors/portfolio investors to pull out their money; and for example, move to the USA hoping to cash on Fed’s rate of 6 percent. These investors have USD in our Government papers (treasury bill; bonds around USD 3 bllion?). Their behaviour can be viewed as speculative but investors always are looking for deals including via speculation.
- The price of coffee has been affected by coffee production in Brazil. In Uganda, over 40% of farming households (over 2 million smallholder coffee households) grow some coffee. Globally, the price of coffee, which is majorly exported as green beans/raw coffee not processed, has been affected by good season for and investments in the coffee value chain in Brazil – the world’s number One producer and exporter of coffee. For cocoa, which is among the top exports, the price globally has been affected by good seasons in west Africa where the world sources around 70 percent of total global cocoa imports. Gold continues being on top of Uganda’s exports. Good that we are now beginning to mine our own gold in loads, in addition to imports to which we add value and export.
- Import bill. We are still importing goods for different uses. Some imports require import substitution. The cost of imports (purchase price in source countries, import duties, logistics and handling, etc.,) is reflected in both the local cost of these imports and prices other locally produced products.
- Corporates/companies remitting their monies back to their bank accounts in their country of origin. This is usually on a weekly basis most times. This is not new. Therefore, I will concentrate on the other issues above.
How can we address the SH. vs USD relationship in the short term and medium to long term?
In the short term we may need to do the following:
Role of the monetary policy instruments and Bank of Uganda. Control the excess USD on the market by increased lending rate to commercial banks; assurances to the public that the situation is temporary; and moral suasion to commercial banks and institutional investors/portfolio investors.
Government work with private sector and discourage payment of rent and services in USD domestically. While paying rent and services in USD may support investors (both private and foreign), during this period it will increase the cost of their users and also influences the exchange rate (USD vs SH.)
Let us produce and increase exports of “low-hanging fruits” e.g., fish and fish products; dairy products; vegetables; maize; beans; etc. With the next season, coffee and cocoa exports are coming in to continue adding to our export revenues.
Let us produce, add value, and sell domestically but importantly also export these selected enterprises (coffee; cocoa; maize; beans; diary; fish; gold; Rare Earth Elements; iron ore and steel; and remittances; and tourism) and their value-added products.
Public assurances by Finance Ministry on the direction of the economy and the possible short-term nature of this SH. Vs USD relationship.
In the medium to long term, we need have to do the following:
Agri-industry and value addition in selected sectors. We can select 13 products/services under agroindustry, minerals and services. These 13 value chains or products/services are agro-industry (coffee; cocoa; maize; beans; diary; and fish; with oil palm; and rice for import substitution), minerals (gold; Rare Earth Elements; iron ore and steel); and services (remittances; and tourism) - each with its own target in US$; and with additional contributions of other export Commodities (to be discussed and agreed). By 2040, these value chains will be generating over US$100 billion and spreading household income, creating jobs, increasing exports and the total economy.
Increase production via large farmers to produce key agro-industry produce and exports value chains. Government support to these large farmer firms will increase production and productivity and sometimes attract out-growers to these farms.
Tourism receipts. Continue to improve on the number of tourist inflows, their spend amount, and their period of stays during their visit. It is positively noted that period of tourist stays during their visit has been improving and its now at over 8.8 days. However, the number of international tourist arrivals from the rich countries (US, Europe, China, and gulf states) is yet to increase in total as it was below 100,000 people annually recently.
Labour externalization of professional services. Let us learn from the example of the Philippines which is known for externalizing professionals globally. The Central Bank of Philippines since 2023 has been reporting remittances of over USD30 billion per annum. In addition to the already generally externalized labour, there is need to partner with international external labour agencies (e.g., Adecco; others) and develop and place our professionals in jobs abroad. Like Philippines, we have a lot of graduates and professionals that we can prepare and place in jobs internationally. This is not a bad thing. This is movement of labour to the highest bidder in an open economy playing in international trade.
Import substitution. Uganda is importing a lot of rice, ground nuts, beans, and cooking oil products; among others. These products combined together take away our hard-earned USD of over USD 1 billion. If we are to use today’s USD rate, it would be more than USD 1.3 billion. Let us do all we can to produce more than 70 percent of the amount we are donating abroad through these particular import goods. All these crops can be grown here in Uganda.
Marketing Brand Uganda.
Marketing Uganda generally and specifically is penultimately and ultimately vital for our country Uganda. This is over and above tourism marketing. It involves all efforts to position Uganda for exports, FDI, tourism, diaspora and remittances, sports, relations with target countries/markets and international organizations; etc.
The work of Uganda missions abroad under especially economic and commercial diplomacy (ECD) working with MDAs in investment, exports, tourism sectors is very paramount in marketing Uganda.
Continue to rightly assure our other stakeholders (investors; development partners; foreign buyers of Uganda goods and services; exporters; diaspora, and others) that Uganda is the right place to be and be competitive globally. That security is assured by giving them assurance of our prolonged period of peace in a region where other countries have a peace deficit. In Uganda, peace and stability have been here for almost four decades. There is no alternative to security, peace and stability. We need it all the time. Investors need it. Households needs. Wildlife in national parks need it. Tourism needs it. We don’t need security for only Uganda. We need security for East Africa, and Africa. Security has become strategic for almost all economies. We need to protect ourselves. No outsider will do so for us.
In Uganda leadership has been vital for stability and growth of the economy. Leadership has been responsible for growth of countries; for peace and stability; for human dignity.
For God and My Country
The writer is an economist, fellow of marketing, international author, former ED – Uganda Export Promotion Board; currently Deputy ED - Uganda FreeZones and Export Promotions Authority (UFZEPA)