By Michael Jjingo
When fuel prices rise, the filling station is where the problem becomes visible. But Uganda’s rising fuel prices tell a much bigger economic story than the numbers displayed at the pump. They reveal the country’s exposure to exchange-rate volatility, climate-related agricultural risks, dependence on imported inputs and the economic cost of weakening investor confidence.
Between June and October, petrol prices rose from about Shs6,415 to Shs6,890 per litre, while diesel increased from approximately Shs6,510 to Shs7,190. These represent increases of about 7.4 per cent and 10.4 per cent, respectively, in just four months. An additional tax increase of approximately Shs200 per litre has added to the pressure on consumers and businesses.
Yet the most revealing figure may not be the price of oil on the international market, which has been reported at around $106 per barrel, but the movement of the Uganda shilling against the US dollar. The exchange rate has reportedly weakened from approximately Shs3,634 in June to Shs4,140 in October.
The implication is straightforward: Uganda is paying more shillings for imported commodities because its currency has lost value against the dollar. Even when global prices remain unchanged, a weaker shilling raises the domestic cost of imports. When international prices and the exchange rate move adversely at the same time, the pressure becomes even greater.
This is why the fuel-price debate should not end at the pump. It should lead us to a broader discussion about productivity, foreign-exchange earnings and the resilience of Uganda’s economy.
Fuel prices and the cost of doing business
Fuel is not merely a commodity consumed by motorists. It is a critical input into almost every productive activity.
Diesel moves trucks, powers factories, supports construction, runs agricultural machinery and transports food from farms to markets. When diesel prices rise, farmers pay more to move produce, manufacturers incur higher operating costs, traders spend more on distribution, and consumers ultimately pay more for goods and services.
Economists describe this as a multiplier effect. Higher fuel prices feed into transport costs, production expenses and the general price level. For an economy such as Uganda’s, which depends heavily on imported petroleum products, exchange-rate movements can intensify these pressures.
Milton Friedman’s observation that “Inflation is always and everywhere a monetary phenomenon” offers one perspective on the inflation debate. However, Uganda’s experience also demonstrates how imported inflation and currency depreciation can transmit external shocks into domestic prices.
The challenge, therefore, is not simply to manage the immediate increase in fuel prices. It is to reduce the extent to which movements in international markets and foreign currencies destabilise domestic production and household incomes.
Agriculture: where the economic squeeze is most severe
The consequences are particularly serious for farmers, who often have limited capacity to absorb rising costs.
A coffee farmer does not experience economic pressures through abstract discussions about exchange rates or global commodity markets. The effects are felt through prolonged dry spells, the cost of fertilisers and other farm inputs, transport expenses and the price received at the farm gate.
When drought reduces agricultural yields while the cost of producing and transporting crops rises, farmers face a double burden. They have less produce to sell and higher costs to recover.
The result is an economic squeeze characterised by lower output, rising production costs and uncertain returns.
If Uganda is serious about agricultural transformation, climate resilience must become an economic policy priority rather than remain confined to environmental discussions. Investment in irrigation, water harvesting, climate-smart farming, storage infrastructure and value addition can help farmers maintain production, reduce post-harvest losses and earn more from their output.
These investments also have implications beyond agriculture. A more productive and climate-resilient farming sector can strengthen food security, support agro-processing, increase export earnings and reduce the pressure on households when weather conditions deteriorate.
In other words, helping farmers adapt to climate change is also a strategy for strengthening Uganda’s economic resilience.
Investor confidence is an economic asset
There is another dimension to this debate that deserves greater attention: confidence.
Uganda’s sovereignty legislation has raised concerns among some development partners and foreign-funded organisations about the operating environment and the treatment of externally financed activities. Although the legislation was subsequently narrowed, the broader economic lesson remains relevant: policy decisions influence how investors assess risk.
Capital is often cautious. Investors consider not only potential returns but also policy predictability, regulatory consistency, institutional credibility and the security of their investments.
A country can exercise its sovereignty while remaining open to investment, international cooperation and productive partnerships. Indeed, national sovereignty and economic openness need not be contradictory. The challenge is to establish a policy environment that protects national interests while giving businesses and investors confidence to commit capital for the long term.
When confidence weakens, investment decisions may be delayed, financing can become more expensive, and opportunities for job creation and technology transfer may be lost.
The economic consequences may not be immediately visible in the same way as a rise in fuel prices, but they can be just as significant over time.
For Uganda, the priority should be to strengthen institutional credibility, maintain predictable policies and communicate regulatory changes clearly. Confidence is not built through declarations alone; it is earned through consistency, transparency and the effective implementation of policy.
Uganda must earn more dollars
The central question is how Uganda can become less vulnerable to shocks originating beyond its borders.
Part of the answer lies in strengthening the country’s capacity to generate foreign exchange. Uganda needs to export more, diversify its export base, deepen tourism, expand manufacturing, accelerate agro-processing and attract quality foreign direct investment.
It must also increase domestic production of strategic inputs, expand renewable energy and develop adequate strategic fuel reserves where economically viable.
These measures would address different aspects of the same problem. Stronger exports bring in foreign exchange. Agro-processing allows Uganda to capture more value from its agricultural output. Manufacturing can reduce reliance on selected imported goods while creating employment. Renewable energy can help reduce exposure to imported petroleum products in suitable applications.
At the same time, foreign direct investment can bring capital, technology, skills and access to international markets, provided the investments are productive and generate lasting domestic benefits.
Dambisa Moyo’s work on economic development highlights the importance of how countries mobilise and deploy capital. For Uganda, the objective should not be to depend indefinitely on external financing, but to use investment and financing strategically to expand productive capacity and build sustainable sources of income.
The distinction is important: borrowing can finance development, but stronger domestic production and export earnings help build the capacity to service that borrowing.
Tourism: an export that arrives in person
Tourism is another important source of foreign exchange that deserves greater attention in the debate about the shilling and the cost of imports.
The Ebola outbreak disrupted perceptions of travel safety and prompted some visitors to cancel or postpone trips to Uganda. Even after a country is declared free of an outbreak, the economic effects of such a shock may persist because confidence among international travellers can take time to recover.
Tourism is, in effect, an export delivered on Ugandan soil. Visitors bring foreign currency and spend it on accommodation, transport, food, attractions, cultural experiences and locally produced goods. That spending supports businesses, employment, tax revenue and livelihoods across the tourism value chain.
When visitors stay away, the losses extend well beyond hotels. Transport operators, tour guides, restaurants, farmers supplying food, craft producers and other small businesses can all experience reduced demand.
A tourist who does not arrive represents not only lost revenue but also foreign exchange that the economy might otherwise have earned.
Uganda must therefore treat tourism marketing, public health preparedness and the management of international perceptions as economic priorities. Clear communication during health emergencies, credible safety information and sustained promotion of the country’s tourism attractions can help protect confidence and support recovery.
From managing fuel prices to strengthening the economy
Uganda’s response to rising fuel prices must extend beyond attempts to manage the price displayed at filling stations. While appropriate tax and market policies matter, lasting resilience requires a broader economic strategy.
The country needs to expand foreign-exchange earnings, strengthen productive sectors, support climate-resilient agriculture, deepen domestic value addition, maintain investor confidence and reduce excessive dependence on imported energy and other strategic inputs.
This is also why economic policy must be coordinated. Measures that support agricultural production, for example, can improve export earnings. Policies that encourage manufacturing and agro-processing can create jobs while increasing the value of domestic output. Reliable institutions and predictable regulations can help attract the investment required to expand these activities.
The objective should be to create an economy that can absorb external shocks without passing their full cost on to businesses, farmers and households.
John Maynard Keynes is widely associated with the statement, “When the facts change, I change my mind.” Uganda must similarly remain responsive to changing economic realities. Global energy markets are volatile, climate change threatens agricultural productivity, currency movements affect import costs, and international perceptions influence tourism and investment.
These pressures are interconnected. Treating each one as an isolated problem risks producing temporary solutions while leaving the underlying vulnerabilities untouched.
Fuel is expensive. The dollar is expensive. Transport is expensive. Food is expensive. Capital can become more expensive when risk rises. These are not entirely separate problems; they are different expressions of an economy’s exposure to external shocks and its capacity to generate domestic value.
As Peter Drucker’s management philosophy reminds us, effectiveness is not simply about doing more, but about concentrating on what matters most. For Uganda, that means producing more, exporting more, attracting productive investment, earning more foreign exchange, adding value locally and using public resources more efficiently.
Ultimately, a dollar earned through productive exports is different from a dollar borrowed to finance consumption. Borrowing has a legitimate role in development, but sustainable economic strength depends on the capacity to generate income, improve productivity and create value.
The lesson from the fuel price at the pump is therefore much bigger than the cost of petrol or diesel. Uganda does not simply need cheaper fuel. It needs a more productive, competitive and resilient economy—one that earns more of the dollars it requires, protects its productive sectors from avoidable shocks and inspires confidence among investors, businesses and citizens.
The writer is the General Manager of Commercial Banking at Centenary Bank.