The weakening shilling is forcing households to reconsider how they spend their money, but the government’s call for people to adjust their lifestyles has equally raised a mixed reaction.
Amidist the debate, some are asking: how much of the economic strain is caused by external shocks, and how much reflects vulnerabilities within the domestic economy?
As the shilling comes under pressure, the government is urging households to change their spending habits, with Ramathan Ggoobi, the Permanent Secretary and Secretary to the Treasury, advising Ugandans to reduce discretionary spending and switch from imported goods to locally produced alternatives.
Ggoobi over the weekend at several fora including interviews at FM stations said households needed to adjust to changing economic conditions rather than expect their spending patterns to remain unchanged.
“You have to lose some level of happiness or enjoyment to survive,” Ggoobi said, arguing that locally produced foods could offer cheaper alternatives to imported household staples.
“Why are you eating spaghetti at a time when inflation is rising and the exchange rate is high?” he asked, pointing to potatoes, cassava and matooke as alternatives.
He also urged motorists to reduce unnecessary fuel consumption, including trips to drop off other people, as the cost of running vehicles rises.
Ggoobi revealed that , spending adjustments were already under way in the government.
He said half of the fuel budget for the second quarter of the 2026/27 financial year had been released, while expenditure on consumptive items had been reduced and growth-driving sectors, including agriculture and tourism, protected.
His advice which has attracted mixed reaction comes amidst pressure facing households and businesses as the shilling loses value.
Buying locally produced goods can reduce exposure to imported costs in some cases, although domestic prices are not insulated from depreciation.
Fuel, fertiliser, machinery, transport and other production inputs can become more expensive, pushing up the prices of locally produced goods as well.
Ggoobi’s appeal for households to adjust raises a question about who bears the cost of stabilising the economy.
Some have suggested that reducing unnecessary imports and fuel consumption may help individual households manage their budgets, but it does not resolve the underlying pressures on the currency, including demand for dollars to pay for imports and the widening merchandise trade deficit documented in the September economy report by the Ministry of Finance.
Does a change in consumption habits guarantee that workers’ incomes will keep pace with prices?
For households whose earnings are already stretched by food, transport and other essentials, the room to cut spending may be limited.
The advice reflects the immediate difficulties facing households as the shilling weakens and the cost of imported goods rises.
But it also shifts attention to the sacrifices consumers are expected to make while policymakers attempt to stabilise the economy.
The Ministry of Finance, Planning and Economic Development’s September 2026 Performance of the Economy Report documents was spot on about the scale of the deterioration.
The shilling depreciated by 3.7 percent against the US dollar during September, trading at an average mid-rate of Shs3,868.87 per dollar, compared with Shs3,730.25 in August.
The decline followed a sharper weakening from around Shs3,604 in March to above Shs4,000 in early October, according to figures cited by Kabweri County MP Patrick Wakida in his analysis of the currency’s performance.
The weakening currency matters greatly affects the economy because Uganda relies on imports for petroleum products, machinery, vehicles, medicines and other goods.
Importers need more shillings to purchase the same amount of dollars, potentially increasing the prices charged to businesses and consumers.
The effects were reflected in the September inflation figures. Annual headline inflation rose to 4.6 percent from 4.1 percent in August.
Inflation for energy, fuel and utilities reached 14.5 percent, while prices of food crops and related items rose at a faster pace.
Transport costs added to the pressure. Taxi fares across different distances and long-distance bus fares increased by an average of 14.9 percent in September, compared with 14.2 percent in August.
Apart from the depreciation, the Ministry also identified higher international oil prices, unfavourable weather affecting food supplies and rising production and transport costs. So, a weaker shilling compounds these pressures by increasing the local-currency cost of imported fuel and other inputs.
The result can be a chain of price increases affecting production, distribution and household expenditure.
But Wakida is arguing that the country’s economic difficulties are driven more by domestic factors than by external developments.
In an analysis published on his X account in October, the legislator questioned why the shilling had weakened more sharply than the Kenyan and Tanzanian currencies over the same period.
“If it was war in the Middle East or a strong US dollar, all three would fall together. They didn’t. Only UGX fell,” he argued.
Wakida attributes part of the pressure to declining foreign-currency inflows and investor uncertainty.
He alleges that offshore investors withdrew between US$400 million and US$600 million over four months, reducing the supply of dollars in the domestic market.
He links the alleged withdrawals partly to concerns surrounding the Protection of Sovereignty legislation enacted in May 2026.
According to his argument, foreign investors may have sold government securities and converted the proceeds into dollars before moving their funds abroad.
The extent to which the legislation contributed to the depreciation remains contested.
Bank of Uganda Governor Michael Atingi-Ego has rejected the claim that the law was responsible for the currency’s decline, pointing instead to the widening current-account deficit and reduced portfolio investment flows.
Wakida also identifies the structure of Uganda’s petroleum imports as a source of pressure.
He argues that the Uganda National Oil Company’s role as the sole importer of petroleum products has concentrated substantial demand for dollars into relatively short periods.
He estimates that the company needs between US$150 million and US$180 million each month to finance fuel purchases.
The wider issue is the balance between the supply of foreign currency and demand for it. Uganda needs dollars to finance imports and meet external obligations, but the availability of those dollars depends on export receipts, tourism, remittances, investment and other foreign-currency inflows.
Wakida argues that Uganda is not fully benefiting from the dollars generated by its exports because some proceeds may remain outside the domestic market or may not be converted into shillings immediately.
He cited gold, coffee and tourism as potential sources of foreign currency that could help ease the pressure.
Others have stated that export earnings do not necessarily translate into immediate dollar supply, and the exchange rate is also influenced by the timing of payments, capital flows and demand for foreign currency.
However, there a question whether the country’s economic structure generates and retains sufficient foreign exchange to finance its imports without repeated periods of severe currency pressure.
The September economy report provides evidence of an external imbalance that may be contributing to the shilling’s weakness.
The export receipts increased by 40.6 percent year-on-year to US$1.49 billion in August 2026, up from US$1.06 billion in August 2025. But imports rose even faster, increasing by 66.5 percent to US$2.31 billion from US$1.39 billion over the same period. While the merchandise trade deficit widened to US$817.03 million in August, compared with US$325.53 million a year earlier.
Some have suggested that the figures explain why rising exports alone do not guarantee a stronger currency. The government earned more from exports, but the amount spent on imports increased by a greater proportion.
Some imports, including machinery, vehicles and industrial equipment, are necessary for investment and production.
Petroleum products are also essential to transport and many economic activities. There is a line of thought suggesting that reducing imports indiscriminately could undermine production and growth.
The have challenged the government to expand productive capacity, improve the competitiveness of exports and increase the value retains from goods sold abroad. For the, a more diversified export base could also reduce dependence on a small number of commodities. Where export earnings are concentrated in products whose prices fluctuate internationally, the supply of foreign currency can become more vulnerable to changes in global markets.
The Bank of Uganda has also highlighted the wider external imbalance. In mid-October, Governor Michael Atingi-Ego pointed to a goods trade deficit of US$2.8 billion and a services deficit of US$3.3 billion in the 12 months to August 2026.
These figures suggest that the currency pressure is not simply a question of households buying too many imported goods.
This shows a relationship between Uganda’s foreign-currency earnings, import requirements, services payments and investment flows.
The government’s response has focused partly on reducing spending and encouraging consumers to buy local products.
The Bank of Uganda, meanwhile, has tightened monetary policy to contain inflation and limit further depreciation. On October 14, the central bank raised its Central Bank Rate from 9.75 percent to 12 percent.
On October 22, it began selling foreign currency in the market in an attempt to support the weakening shilling. These measures illustrate the difficulty of stabilising the currency.
Higher interest rates can help contain inflation and influence investment decisions, but they also raise borrowing costs for businesses and households.
Foreign-exchange sales can ease immediate pressure, but sustained intervention may be costly if the underlying demand for dollars continues to exceed supply.
The government must therefore balance currency stability with the need to sustain economic activity.
Ggoobi’s call for households to change their consumption patterns may help families manage their budgets. Buying locally produced foods can reduce exposure to some imported costs, while avoiding unnecessary journeys can lower fuel expenditure.
But local production is not insulated from currency depreciation. Farmers and manufacturers may also face higher costs for fuel, fertiliser, machinery, packaging and transport.
These costs can eventually be reflected in the prices of locally produced goods. Nor can every household reduce spending by the same amount.
Families already spending most of their incomes on food, transport and housing have less room to make further cuts than households with higher disposable incomes.
If consumers cut spending because their incomes no longer cover essential expenses, demand for goods and services can weaken. Businesses may then delay investment, reduce recruitment or struggle to maintain sales. This means measures intended to restore stability can impose immediate costs on the same households and businesses that the economy needs to keep producing, spending and investing. Despite the pressure on the shilling, the country’s economic indicators continue to show expansion.
The Purchasing Managers’ Index stood at 53.0 in September, above the 50-point threshold that signals improving private-sector business conditions. However, it had fallen from 55.0 in August, suggesting that the pace of improvement had moderated. The Business Tendency Index also remained above the threshold associated with optimism, declining to 55.80 from 57.69. Meanwhile, the Composite Index of Economic Activity increased by 0.3 percent to 193.87 in August from 193.30 in July. The indicators describe an economy in which business activity is still growing, even as firms face higher costs and households experience pressure on their purchasing power.
The question is whether the currency crisis can be explained mainly by global developments or whether domestic economic decisions have made Uganda more vulnerable to the pressure.
A recent analysis by the International Labour Organization reflected on a situation similar to what is happening in Uganda and other low-income countries.
The ILO Chief Economist, Sangheon Lee, argues that economic growth should be judged not only by how much an economy produces, but also by whether workers’ incomes and living standards improve.
He argues that if households must continually sacrifice consumption because their earnings cannot keep pace with costs, continued economic expansion alone offers an incomplete picture of economic wellbeing.
Lee argued that economic growth and productivity gains do not automatically translate into higher wages.
He explains that inflation falling does not mean prices have returned to earlier levels. “ It means prices are rising more slowly. Where wages have failed to keep pace with earlier price increases, workers may continue to experience a decline in purchasing power even after inflation moderates,”
He also argued that low pay and low productivity can reinforce one another. Businesses with limited access to finance, technology and skills may struggle to raise productivity and pay higher wages.
At the same time, poorly paid workers and enterprises with low profits have fewer resources to invest in skills and improved production.
For Uganda, in the current scenario, the prices and transport costs are rising while the shilling is weakening. They do not, on their own, establish whether wages have kept pace with those increases.
So if businesses continue to expand while workers have less money available after paying for essential goods and services, how much of the growth is translating into better living standards?
Lee argues that decent jobs should not be treated merely as an outcome of growth. Better wages and more productive employment can also drive growth by strengthening household demand, encouraging investment and helping businesses develop new skills and capabilities.
The weakening shilling has exposed vulnerabilities in Uganda’s external position, but the debate over its causes remains unresolved. The Ministry of Finance points to global oil prices, the stronger dollar, seasonal demand for foreign currency and speculation in the local market.
The Bank of Uganda has highlighted the current-account deficit and reduced portfolio investment flows.
Wakida argues that domestic policy decisions, investor uncertainty and the availability of export earnings have also played a significant role.
The challenge is to establish the relative contribution of each factor and determine which policy responses can address the underlying causes rather than merely manage the immediate symptoms.
Ggoobi’s appeal for households to adjust may help people cope with higher costs, but changes in consumption habits cannot substitute for policies that improve foreign-currency earnings, strengthen domestic production and sustain investor confidence.
can economic growth alone guarantee better living standards if the gains do not translate into higher real incomes and more productive jobs.
The immediate task is to stabilise the shilling and contain inflation without unnecessarily undermining credit, investment and domestic demand.
The longer-term task is to reduce the economy’s vulnerability to imported shocks by expanding productive capacity, diversifying exports and creating jobs that generate higher and more secure incomes.
Ultimately, the performance of Uganda’s economy must be judged by more than the volume of goods and services produced or the pace of business expansion.
It must also be judged by whether people can afford essential goods, whether work provides a decent income and whether households are better equipped to withstand economic shocks-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
