KAMPALA — Government has urged Ugandans to avoid panic buying of foreign currency and speculative transactions driven by rumours as the shilling faces mounting pressure from increased demand for the US dollar and declining foreign exchange inflows.
The Minister of State for Finance, Planning and Economic Development, Henry Musasizi, said government was supporting monetary policy measures through expenditure restraint and careful prioritisation of public spending to stabilise the economy.
Presenting a statement on the state of the economy on Tuesday, October 27, 2026, Musasizi said the Bank of Uganda had tightened monetary conditions to moderate excessive demand, contain inflation and restore confidence in the shilling.
“Bank of Uganda has tightened monetary conditions, including raising the Central Bank Rate from 9.75 per cent to 12 per cent and increasing commercial banks’ cash reserve requirement to 13.5 per cent from 11 per cent,” Musasizi said.
He said the measures were intended to curb excessive demand and contain inflationary pressures amid growing imbalances in the foreign exchange market.
According to Musasizi, the pressure on the shilling is largely driven by increased demand for foreign currency, particularly the US dollar, against limited supply.
He cited data from the Bank of Uganda showing that net foreign exchange demand from the energy sector rose from $360 million in the three months ending September 2025 to $620 million during the corresponding period in 2026.
The $260 million increase has added significant pressure to the foreign exchange market, complicating efforts to maintain stability in the exchange rate.
Fuel prices under pressure
Musasizi said the foreign exchange pressures had also affected domestic fuel prices through changes in international petroleum costs and the exchange rate at which importers purchase dollars.
He said government would continue promoting a free, fair and competitive petroleum market to ensure reliable and uninterrupted fuel supplies while moderating avoidable price increases.
The minister said maintaining competition in the petroleum sector was essential to preventing shortages and protecting households and businesses from additional economic pressure.
He also attributed the reduction in foreign exchange inflows to declining global prices of key agricultural exports, including coffee and cocoa, as well as reduced tourism receipts associated with Ebola-related travel restrictions and health-screening measures.
The minister said these developments had temporarily constrained the country’s foreign exchange earnings at a time when demand for dollars was rising.
To manage the situation, Musasizi said government would prioritise essential services, critical obligations and investments that support production, employment and foreign exchange generation.
He identified agro-industrialisation, tourism, mineral development, science, technology and innovation as key priorities under the Ten-fold Growth Strategy.
MPs call for business-friendly tax collection
During the debate, Gyaviira Lubowa, the Nyendo-Mukungwe Division MP, called on the Uganda Revenue Authority (URA) to strengthen its engagement with the business community to improve tax compliance and collection without unnecessarily disrupting business operations.
Lubowa urged government to encourage dialogue between URA and business owners, arguing that negotiated payment arrangements could help traders meet their tax obligations while protecting their businesses.
He questioned the reliance on enforcement measures such as auctioning merchandise, saying more cooperative approaches could deliver better outcomes for both businesses and government revenue collection.
Calls to revive tourism
Rukiga County MP Patrick Kiconco urged government to intensify diplomatic efforts to communicate Uganda’s Ebola-free status internationally and restore confidence among prospective visitors.
Kiconco said concerns about Ebola-related travel restrictions could discourage tourists from visiting Uganda because of fears that they might face difficulties returning to their countries of residence.
“Uganda has not registered any new Ebola case, but we are still blacklisted and are not receiving tourists. There are people who might be afraid to come to Uganda because going back abroad could become problematic,” he said.
He said restoring international confidence in Uganda’s health status would help revive tourism receipts and increase foreign exchange inflows.
Tourism is one of Uganda’s important sources of foreign exchange, making the recovery of visitor numbers significant to efforts to ease pressure on the shilling.
MPs caution against using reserves
Kabweri County MP Patrick Wakida cautioned government against using national reserves to intervene in the volatile foreign exchange market, arguing that such a move could have unintended consequences for consumer prices.
Wakida cited Kenya’s use of reserves in April as an example, saying the timing of such interventions was important.
“If we touch our reserve now, it will end up in consumer products. Let us advise our constituents to manage what they have for now. We are in a recession but we will recover,” he said.
He urged Ugandans to exercise financial discipline as the country navigates the current economic pressures.
Meanwhile, Upper Madi County MP Martin Drito proposed that government consider holding a larger proportion of the country’s reserves in gold rather than US dollars as a strategy to strengthen reserve diversification.
The proposal came amid concerns about the country’s exposure to fluctuations in the foreign exchange market and the need to safeguard financial stability.
MPs propose minimum wage
Other legislators called for measures to protect household purchasing power as the cost of living and economic uncertainty continue to affect Ugandans.
Kumi District Woman Representative Christine Apolot and Jinja South Division East MP Paul Mwiru urged government to consider introducing a minimum wage to improve workers’ earnings and strengthen their ability to afford essential goods and services.
They argued that improving incomes would help households cope with economic pressures and support domestic demand.
The debate comes as government seeks to balance efforts to stabilise the shilling, contain inflation and sustain economic activity.
While monetary tightening is intended to reduce excessive demand and support the currency, legislators also called for complementary interventions to protect businesses, boost exports, revive tourism and improve household incomes.
Government’s ability to expand foreign exchange earnings while managing demand for dollars is likely to remain central to efforts to stabilise the shilling and sustain economic recovery.
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