The Uganda Shilling emerged as one of Africa’s most stable currencies in the financial year 2024/25, appreciating by an average of 2.7% against the US Dollar. This performance, detailed in the Bank of Uganda’s latest annual report, resulted in an annual mid-rate of UGX 3,678 per USD, a significant strengthening from UGX 3,777 per USD the previous year.
The Shilling’s strength was sustained throughout the period, gaining 1.1% in the first half of the year and a further 4.2% in the second half. This resilience was supported by a combination of prudent monetary and fiscal policies, ongoing financial market reforms, and robust foreign exchange inflows. Key sources of inflows included coffee exports, remittances, and non-governmental organizations, which comfortably met corporate demand for foreign exchange.
Externally, the weakening of the US Dollar, reflected in the decline of the US Fed Index, partly due to tariffs and retaliatory measures from trade partners, also contributed to the Shilling’s stability. Relative to a basket of trading partner currencies, the Uganda Shilling remained strong, as reflected by a 2.1% average appreciation in the Nominal Effective Exchange Rate (NEER) index.
A stable exchange rate is a cornerstone of the BoU’s policy, as it creates a predictable environment for investors, helps businesses compete more effectively on the global market, and contains imported inflation. The central bank prioritized exchange rate stability, recognizing its importance in supporting investor confidence and overall macroeconomic stability.
To build further resilience, the BoU took advantage of strong foreign exchange inflows to accumulate international reserves deliberately. Gross official reserves rose to USD 4,297.8 million by the end of June 2025, equivalent to 3.9 months of future import cover (excluding oil-related imports). This was a substantial increase from USD 3,234.0 million (3.1 months of import cover) in the previous year, enhancing the country’s buffer against external shocks.
Looking forward, the BoU plans to diversify its reserves further by initiating gold purchases and employing various tools, including foreign exchange swaps and cross-currency repos. This forward-looking approach aims to enhance the portfolio’s stability and reduce correlation with traditional financial assets, safeguarding national wealth against global financial uncertainty.
