Shilling gains, investors pump billions in August

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The Ugandan Shilling strengthened against the US dollar in August 2025, fueled by rising export earnings, growing remittances, and strong investor inflows into government securities.

According to the performance of the economy report for the month of August 2025 from the Ministry of Finance, the local currency averaged sh3,563.9 per US dollar, up from sh3,586.57 in July, marking a clear sign of confidence in Uganda’s financial markets.

The report also notes that an investor-friendly environment also encouraged offshore inflows, boosting the supply of foreign exchange and reinforcing currency stability.

In its latest monetary policy stance, the Bank of Uganda (BoU) kept the Central Bank Rate (CBR) steady at 9.75%. The central bank’s move aims to maintain inflation within the medium-term target of 5 percent while supporting economic growth.

Despite stable policy rates, Shilling-denominated lending rates edged up to 19.65% in July, from 19.07% in June, reflecting market dynamics in the supply and demand for credit. Private sector credit (PSC) contracted slightly by 0.5%, falling from sh23,901.94 billion in June to sh23,785.74 billion in July.

Both Shilling-denominated and foreign currency-denominated loans contributed to the decline, indicating cautious borrowing amid higher costs.

The government’s domestic debt market remained vibrant in August, raising sh1.13 trillion from three auctions of Treasury bills and bonds. Of this total, sh717.34 billion went to refinance maturing securities, while sh410.14 billion supported other budgetary needs.

Treasury bill yields moved in mixed directions: the 91-day bill dropped slightly to 11.5%, the 182-day bill rose to 13.5%, and the 364-day bill held at 15.3%.

Longer-term Treasury bonds saw largely declining yields, reflecting strong investor demand. The 5-year and 15-year bonds fell to 15.5% and 17.7%, down from 16.8% and 17.8%, respectively. The 2-year bond yield remained unchanged at 15.8%, while a new 25-year bond was issued at 16.0%.

Overall, August’s data portrays a financial sector balancing multiple forces. The stronger Shilling, stable interest rates, cautious private sector lending, and active government borrowing indicate an economy supported by both domestic confidence and external inflows.

Analysts note that maintaining currency stability, liquidity, and manageable borrowing costs will be essential to sustaining growth and investor confidence in the months ahead.