Uganda’s shilling has weakened to its lowest level since 1993 as rising US bond yields, foreign-investor withdrawals and strong demand for dollars put pressure on the East African currency.
- Uganda’s shilling has plunged to its weakest point since 1993 due to soaring US bond yields, foreign-investor flight, and intense dollar demand.
- Between late August and now, the shilling lost over 10%—the worst performance among 144 monitored currencies globally.
- Over $200 million exited Uganda’s markets in just two weeks as investors switched from local bonds to dollar assets with better returns.
- President Museveni refuses to use Uganda's foreign-exchange reserves to bolster the shilling, instead promoting local consumption and exports.
The shilling fell to 4,143 per dollar in Kampala, taking its losses since August 25 to more than 10%, the steepest decline among 144 currencies tracked by Bloomberg.
Citigroup estimates that more than $200 million has left Uganda’s markets in two weeks as investors move away from local-currency bonds towards dollar assets offering higher returns.
Domestic pressures, including increased corporate demand for dollars and rising energy costs, have added to the currency’s challenges.
Museveni rejects dollar intervention
President Yoweri Museveni has opposed using foreign-exchange reserves to defend the shilling, urging Uganda to reduce imports and increase earnings from exports and tourism instead.
He criticised spending reserves on imports such as perfumes and wigs made from human hair, encouraging citizens to buy locally produced food.
"I am totally against the Governor Bank of Uganda’s proposal to squander our reserves and deploy more dollars in the market to counter the falling shilling," Mr Museveni stated. "This is not good. You cannot start helping people who are importing dead people’s hair. We shall minimize the imports."
The pressure comes as Uganda’s goods imports reached $2.31 billion in August, up 66.5% from a year earlier, helping push the country’s trade deficit to a record.
The International Monetary Fund estimates Uganda has $6 billion in foreign-exchange reserves, enough to cover about 2.7 months of imports.
African currencies face mounting pressure
Uganda’s currency troubles mirror wider challenges across African frontier markets as higher US yields encourage investors to move money into dollar-denominated assets.
Zambia has been selling dollars to support its currency, while Ethiopia plans to spend an additional $840 million this year to stabilise the birr, after deploying more than $3 billion to defend it.
The developments highlight the growing cost of currency support as African economies face capital outflows and rising import bills.