Uganda’s Finance Minister, Henry Musasizi, has warned against panic buying of foreign currency as the shilling comes under mounting pressure, weakening to approximately Shs4,500 against the US dollar in late October 2026 from about Shs3,604 in March.
Addressing Parliament on Tuesday, October 27, 2026, Musasizi outlined the factors behind the currency’s depreciation and detailed measures being taken by the government and the Bank of Uganda to stabilise the economy.
The minister attributed the weakening shilling to a growing imbalance between the demand for and supply of foreign exchange, particularly the US dollar, warning that increased demand for imports and external payments is pushing up the cost of the greenback.
He urged Ugandans to avoid panic-driven foreign currency purchases and speculative transactions based on rumours, saying such behaviour could intensify short-term pressure on the shilling.
“Remain calm, avoid panic-driven decisions,” the Ministry of Finance said in a summary of the minister’s key messages following his statement to Parliament.
Petroleum costs, falling commodity prices weigh on shilling
Musasizi identified higher international petroleum prices as one of the major factors increasing Uganda’s demand for foreign exchange.
Uganda relies on imported petroleum products, meaning higher global oil prices increase the amount of dollars required to finance fuel imports. Geopolitical tensions in the Middle East have added uncertainty to international markets, pushing up petroleum-related costs, including shipping and insurance.
The minister said demand for foreign exchange had also increased across other sectors of the economy, while international financial conditions and market expectations had contributed to the pressure on the local currency.
On the supply side, Uganda has faced constraints from declining global prices for key agricultural exports, particularly coffee and cocoa, alongside reduced tourism receipts.
These developments have temporarily limited foreign-exchange inflows at a time when demand for dollars remains elevated.
The depreciation has implications for businesses importing machinery, fuel, medicines, industrial inputs and other goods. A weaker shilling means importers require more local currency to purchase the same amount of foreign exchange, potentially increasing costs for businesses and consumers.
Bank of Uganda raises interest rates to 12%
In response to the pressure, the Bank of Uganda has tightened monetary conditions in an effort to moderate demand, contain inflationary pressures and support confidence in the shilling.
Musasizi said the Central Bank Rate had been raised from 9.75% to 12%, while the cash reserve requirement for commercial banks had increased from 11% to 13.5%.
The measures are intended to tighten financial conditions and help contain excessive demand in the economy.
The minister said the central bank would continue managing liquidity and could intervene in the foreign-exchange market where necessary to address excessive volatility, in line with its mandate.
However, he reaffirmed Uganda’s commitment to a market-determined exchange rate, under which the shilling adjusts to changes in external economic conditions.
The approach means the authorities are seeking to limit disruptive fluctuations rather than guarantee a particular exchange rate.
Government orders cuts in non-essential expenditure
On the fiscal front, Musasizi said the government would support the central bank’s efforts through tighter spending controls and careful prioritisation of public expenditure.
The government plans to rationalise non-essential expenditure, including foreign and domestic travel, workshops, meetings and other administrative costs.
The proposed restraint is intended to reduce avoidable spending while protecting essential public services and priority development investments.
The announcement places government administrative expenditure under scrutiny as the authorities seek to respond to external economic pressures without undermining critical public programmes.
The Ministry of Finance also called on households to prioritise essential expenditure, conserve fuel and energy, and make informed purchasing decisions.
Businesses were urged to eliminate waste, improve operational efficiency, source inputs locally where commercially viable and expand production for export markets.
Government insists economic fundamentals remain strong
Despite the pressure on the currency, Musasizi maintained that Uganda’s underlying economic fundamentals remain strong, pointing to continued growth supported by production, investment and exports.
The government is also seeking to reassure households, investors and businesses that the depreciation does not necessarily signal a collapse in economic activity.
International reserves remain an important buffer against external shocks, the minister said, adding that their prudent management is necessary to address disruptive market conditions while preserving Uganda’s ability to meet external obligations.
The government and the Bank of Uganda have pledged to provide timely and factual information to help the public make informed financial decisions and maintain confidence in the economy.
What the depreciation means for Ugandans
The movement from approximately Shs3,604 per dollar in March to around Shs4,500 in late October represents a substantial weakening of the shilling.
For import-dependent businesses, the immediate concern is the rising local-currency cost of purchasing goods and paying foreign suppliers. Businesses could respond by raising prices, reducing margins or delaying purchases, depending on their operating costs and market conditions.
Households may also face pressure if businesses pass higher import costs on to consumers. Fuel prices and other imported goods are among the areas potentially affected, although the extent and timing of any price changes will depend on market conditions.
Exporters, on the other hand, may receive more shillings for each dollar earned abroad, depending on their costs and the prices they obtain in international markets.
The government’s response will therefore require balancing the need to contain inflation and restore confidence in the currency against the potential effects of tighter monetary conditions on borrowing, investment and economic activity.
For now, the Finance Ministry is urging the public to avoid speculative behaviour, while the government and central bank pursue monetary and fiscal measures aimed at managing the pressure on the shilling.
