Ugandan Shilling posts strongest performance in years

Uganda’s currency continued to post notable gains in the 2024/25 financial year, buoyed by a mix of favorable macroeconomic trends, rising diaspora remittances, growing export receipts, and new central bank strategies, including gold purchases.

The Ugandan Shilling closed June 2025 at an average mid-rate of UGX 3,605.84 per US Dollar, appreciating by 1.3% from May’s rate of UGX 3,653.40/USD. On an annual basis, the currency strengthened by 2.7%, a significant improvement from the previous year.

According to Bank of Uganda (BoU) data, the average mid-rate for 2023/24 stood at UGX 3,778.61/USD, compared to UGX 3,676.21/USD for 2024/25.

“The relative strengthening of the Shilling… was largely due to financial market reforms that reduced demand for the US dollar, increased remittances, offshore portfolio investments, export earnings, and foreign direct investments,” reads the latest economic update from the Ministry of Finance, Planning and Economic Development.

Gold Purchases Boost Reserves, Support Currency

A key new policy behind the Shilling’s rally has been the BoU’s decision to buy gold locally to bolster Uganda’s foreign exchange reserves. Though the central bank has not publicly disclosed full details, reports suggest Uganda has purchased gold worth over $1.5 billion since the initiative began in 2024.

This strategy has significantly contributed to the rise in gross foreign reserves, which hit $4.3 billion by June 2025, equivalent to 3.8 months of import cover — up from $3.2 billion in June 2024, according to Permanent Secretary Ramathan Ggoobi.

Remittances and Export Earnings Surge

Diaspora remittances grew by 7.3%, totaling $1.4 billion (about UGX 5 trillion) in the year, driven primarily by inflows from Ugandans working in the Middle East. These inflows not only supported household incomes but also eased pressure on the local currency.

On the trade front, export earnings surged by 36.8%, reaching $1.2 billion in May 2025, compared to $876.4 million in the same month last year. This growth outpaced the increase in imports, which rose by 30.1% to $1.31 billion, narrowing the trade deficit.

Despite a trade deficit of $110.85 million in May 2025, the gap was 15.2% smaller than in May 2024, and 3.3% narrower than in April 2025, indicating improved trade performance.

Regional Currency Trends

Uganda’s Shilling wasn’t the only East African currency to gain ground. The Tanzanian Shilling also appreciated by 2.5%, largely due to rising revenues from gold exports and tourism. However, currencies in Rwanda (-0.6%) and Burundi (-0.1%) weakened slightly, while the Kenyan Shilling remained stable.

Globally, the Shilling’s strength is partly attributed to a softening of the US Dollar against several major world currencies in recent months, creating a more favorable exchange environment for emerging markets like Uganda.

With Uganda’s monetary authorities now actively pursuing innovative strategies to stabilize the currency — including diversification of reserves and export promotion — the Shilling is projected to remain resilient. However, analysts caution that continued strength will depend on maintaining macroeconomic stability, global commodity prices, and geopolitical developments.