The Ugandan shilling has appreciated steadily for the past 14 months, a development that has sparked both curiosity and debate across the economy.
Bank of Uganda Governor, Michael Atingi-Ego, has shed light on the drivers of this trend and what it means for the country.
“The currency has indeed appreciated for about 14 months. But let me clarify — the Bank of Uganda did not intervene during that period. Our last sale-side intervention was in June 2022,” Governor Atingi-Ego explained.
According to the central bank, several factors have fueled the strengthening of the shilling. These include strong performance in coffee and cocoa exports, improved international coffee prices, prudent monetary policy, recent reforms in the foreign exchange market, inflows from offshore investors, and the weakening of the US dollar globally.
The governor emphasized that Uganda’s exchange rate is market-determined and not propped up by artificial interventions.
“Supporting exporters artificially would risk inflation and higher interest rates. Our focus is preserving stability without distorting fundamentals,” he said.
Analysts note that while a stronger shilling benefits importers and helps ease inflationary pressures, it can also squeeze exporters who earn less in local currency.
The Bank of Uganda insists that its priority is to maintain macroeconomic stability and ensure the currency reflects real market forces.