Economist, Patrick Kiconco Katabaazi, who doubles as the Rukiga County Member of Parliament, has identified five often-overlooked factors contributing to the depreciation of the Uganda shilling, urging greater attention to the underlying pressures on the foreign exchange market.
Katabaazi who doubles as the Rukiga County Member of Parliament said the weakening of the shilling was being driven by several factors beyond rising global oil prices, including foreign companies repatriating profits, speculative demand for dollars, unremitted export earnings, government debt repayments and the growing preference for dollar-denominated payments.
He said Uganda’s dependence on imported fuel, the strength of the US dollar on international markets and the economic effects of the Iran war had increased pressure on the local currency through higher oil prices, freight charges and investor uncertainty.
The economist added that investors withdrawing money from frontier markets had further tightened foreign exchange availability, while companies’ demand for dollars continued to exceed the supply available from commercial banks.
He also noted that Uganda was yet to receive revenue from its oil sector, which could help strengthen foreign exchange inflows.
Katabaazi, however, said five domestic factors deserved greater public attention because of their potential to worsen the shortage of dollars and increase pressure on the shilling.
These include foreign-owned companies repatriating profits to their parent businesses abroad, individuals and firms purchasing dollars in anticipation of further depreciation, and exporters whose earnings do not fully enter Uganda’s formal banking system.
He explained that expectations of further depreciation could become self-reinforcing when individuals and businesses rush to buy dollars, increasing demand and putting additional pressure on the shilling.
The economist also pointed to government debt repayments, particularly when large obligations fall due within a short period, saying they can increase demand for foreign currency and drain liquidity from the market.
Another concern, he said, was the growing preference among some landlords and service providers to demand payments in US dollars, which creates additional demand for the currency within the domestic economy.
Katabaazi argued that public discussions about the shilling’s depreciation should go beyond international oil prices and examine these domestic pressures as well.
“We talk about oil prices a lot. We should talk about these five just as much,” he said.
Available data indicates that the exchange rate hit UGX 3,920 per US dollar by September 2026, up from an average mid-rate of UGX 3,605 earlier in the cycle. When the Ugandan shilling loses value, it might sound like a story for bankers, forex traders and economists, but the effects eventually reach ordinary Ugandans through prices of fuel, food, medicines, vehicle spare parts and other goods.
