The strongest protection is not just raising interest rates or special windows for dollars. It is building an economy that sells more than it buys from the rest of the world
COMMENT | MORRISON RWAKAKAMBA | In simple words, Uganda needs to earn more dollars than it spends, year after year. That is the real foundation of a strong economy.
Think of Uganda’s money dealings with the rest of the world like a family budget. The current account is like your household’s regular income and spending.
Money comes in when Uganda sells coffee, fish, flowers or tourism services to foreigners, or when relatives abroad send money home. Money goes out when we buy fuel, cars, phones, medicine, machinery or other goods from abroad.
A current account surplus means Uganda earns more dollars from what it sells and receives than it spends on what it buys. A deficit means the opposite — we spend more dollars than we earn.
If coffee farmers and exporters bring in more dollars than fuel importers take out, and diaspora Ugandans keep sending money home, Uganda can have a surplus. That is healthy and sustainable.
The capital account and financial account are like one-time or temporary money that comes in from outside. This includes foreigners investing in factories or businesses in Uganda, governments or companies borrowing money from abroad, foreigners buying Ugandan government bonds or shares, and aid and grants.
This money can help for a while, but it can also leave quickly when interest rates rise elsewhere or investors get nervous. It is useful, but it is not as reliable as money Uganda earns by selling its own goods and services.
Relying mainly on foreign loans, aid or hot money is like a family living on borrowed money and occasional gifts. It can work for some time, but when the lenders stop or the gifts reduce, the family struggles.
A sustained current account surplus is like the family having a steady job and selling what it produces. The money is earned, not borrowed. That is more stable.
Exporting more coffee, tea, fish, maize or processed goods brings more dollars in. Attracting more tourists means they spend dollars here. Reducing unnecessary imports — for example, importing less of what can be grown or made locally — keeps more dollars at home.
Keeping remittances flowing from Ugandans abroad helps. Eventually producing some of our own oil means we spend fewer dollars on fuel imports.
When Uganda consistently earns more foreign money than it spends, the shilling becomes more stable, inflation is easier to control, and the country is less vulnerable when global oil prices jump or foreign investors pull their money out.
The strongest protection is not just raising interest rates or special windows for dollars (this is majorly to stop the bleeding). It is building an economy that sells more than it buys from the rest of the world — year after year. That is what gives lasting strength to the shilling and to people’s livelihoods.
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