On October 13, the Uganda shilling touched about Shs4,200 to the dollar, its weakest level since Bloomberg began tracking it in 1993. It had lost roughly 10 per cent of its value since August. The next day, the Bank of Uganda held an emergency meeting and raised the Central Bank Rate from 9.75 to 12 per cent, the largest increase since 2011. The market responded at once. The shilling recovered to around Shs3,984 in Kampala, back below Shs4,000 after eight sessions above it.
The Bank was right to act, and it acted decisively. But let us be clear about what a rate hike can and cannot do.
A higher policy rate makes shilling assets more attractive, draws in money and eases pressure on the currency. It also tells the market that the Bank will not allow a weaker shilling to feed unchecked into prices. The Governor has said plainly that the Bank does not set the exchange rate; the market does, and the Bank smooths the worst swings. That is the right position, and October’s decision followed from it.
Yet interest rates are a blunt instrument, and they have a price. Borrowing becomes dearer for farmers, traders and small manufacturers. The Bank has already cut its growth forecast for the coming financial year to between 6.0 and 6.5 per cent, from 7.0 to 7.5. A rate hike buys time. It does not produce a single extra dollar.
Dollars come from what Uganda sells abroad and what Ugandans abroad send home. When exports, tourism and remittances are strong, the shilling has support. When oil prices climb and global conditions tighten, as they did this year, demand for dollars outruns supply. No central bank can fix that arithmetic alone. The recovery depends on all of us.
The Bank has done its part. Here is what you and I can do with ours.
No single step below will move the exchange rate. Each one is small. But the market is the sum of millions of everyday decisions, and when enough of us make the right ones together, demand for dollars falls and the shilling gets the support it needs. That is why collective action matters.
Hold dollars for need, not for fear. When people fear further depreciation, many rush into dollars. The instinct is understandable, but when enough of us act on it at once, we deepen the very pressure we fear. Dollars for real obligations such as imports, school fees abroad or travel are sound planning. Dollars bought out of anxiety alone are not. With shilling returns now higher, compare Treasury bills and bonds, and the savings products of your bank or SACCO, against the dollar before deciding where your savings are safest. And think before forwarding that panic message on WhatsApp. Rumors move markets too.
Price in shillings. If you run a rental property, a school or a service business whose customers earn in shillings, quote in shillings unless you carry genuine dollar costs. It gives customers certainty and keeps exchange-rate swings out of every bill.
Buy Ugandan, and holiday at home. Uganda will always import fuel, medicines and specialized equipment. But where Ugandan producers offer competitive quality and price, give them the business, whether you are buying for a household or an institution. If a big imported purchase such as a gadget, appliance or vehicle can wait, let it wait. Take the family holiday in Uganda, which keeps spending in shillings and supports our tourism.
Use less fuel. Fuel is one of our largest dollar bills. Carpool, combine trips and keep vehicles well maintained. Make the trip only if you must. Every litre saved is a little less pressure on the currency.
Send money home the formal way. Ugandans abroad are among the country’s most dependable sources of foreign exchange. If you have family abroad, encourage them to use banks, licensed transfer companies or mobile money platforms, and to compare fees and rates across licensed providers. Money in the formal system supports lending and trade, and lets the Bank see the true state of supply. Those who can might also consider Ugandan government bonds. But sector players must do their part by keeping formal channels fast and affordable.
Traders and exporters, play your part. Bring export earnings home and convert them promptly. Importers should buy dollars as needs arise, or use forward contracts, instead of stockpiling out of fear.
Public institutions carry responsibility too. The Bank should communicate clearly and regularly about where rates are heading so that businesses can plan. The Ministry of Finance and the Bank must pull in the same direction, with disciplined borrowing and spending that raises productivity. Government should also be honest about when oil revenues will begin to flow. Markets forgive bad news that is honestly explained, and they punish good news that fails to arrive.
Beyond these steps lies the longer task. Uganda earns much of its foreign exchange from a narrow set of exports. Broader agricultural processing, stronger manufacturing, a bigger tourism sector and a business climate that helps firms sell into regional and global markets would make the shilling far less vulnerable to shocks. None of this lifts the currency by next month. All of it makes the next bout of pressure easier to withstand.
Ordinary Ugandans should not be asked to carry this alone. Households did not cause a global rush for dollars or a conflict that unsettled energy markets, and nobody should be blamed for protecting their savings in an anxious month. The aim is to build conditions in which trust in the shilling is reasonable: steady policy, careful budgeting, competitive local industry and healthy export earnings.
Uganda has been here before. The shilling came under strain in 2022, 2023 and 2024, and recovered each time. Each episode had its own causes, so past recoveries guarantee nothing. What has worked is firm central bank action combined with cooperation across the economy.
The Bank of Uganda has done what a central bank can do. It acted quickly, accepted the cost of higher borrowing rates and gave the shilling room to breathe. The rest depends on the choices the country makes in the weeks ahead, in homes, shops, boardrooms and ministries. None of us can steady the shilling alone. All of us, acting together, can. The shilling is a shared asset. Let us look after it.
Mr. Were works to advance farming systems in Africa based in South Africa.
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