Overview:
The policy is expected to reduce Uganda’s demand for foreign currency in public transactions, stabilize forex markets, and strengthen confidence in the local unit. At the same time, it will require vendors, especially international contractors, to reassess their pricing and risk models.
In a decisive move aimed at strengthening Uganda’s monetary sovereignty and fiscal discipline, the government has launched full enforcement of a long-standing directive banning public entities from conducting procurements and payments in foreign currencies. This policy shift—years in the making—marks a major milestone in the country’s efforts to shield the Uganda Shilling from exchange rate pressures and preserve macroeconomic stability.
The ban, now legally binding across all public contracting entities, mandates that all government procurements and contracts must be conducted and settled in Uganda Shillings, regardless of the source of bidding or nature of the goods and services involved. The only exceptions are foreign missions—allowed to operate in host-country currencies—and contracts explicitly required to be in foreign currency by foreign funders.
“This is not just about compliance—it’s about protecting the integrity, competitiveness, and value of the Uganda Shilling,” said Mr. Ramathan Ggoobi, Permanent Secretary and Secretary to the Treasury (PSST), while issuing the 2025/2026 Budget Execution Circular.
Ggoobi emphasized that quoting and paying in foreign currencies imposes unnecessary pressure on the local currency, raises the cost of doing business, and risks creating budget distortions due to exchange rate volatility. “We collect revenues in shillings. It is irrational and costly to spend them in foreign currencies,” he said.
The directive was first introduced in the 2016/2017 financial year, reiterated multiple times by former PSST Keith Muhakanizi and again by Ggoobi in the 2023/2024 circular. However, enforcement remained weak—largely due to lack of coordination with the Attorney General’s office and loose adherence by accounting officers.
That changes now.
The Ministry of Finance has formally instructed the Attorney General’s chambers to enforce the ban at the contract approval stage, and government systems such as the Integrated Financial Management System (IFMS) and the e-Government Procurement Portal (e-GP) have been configured to block foreign currency entries—ensuring compliance at the system level.
Why It Matters: Shilling Under Siege
Uganda’s economy has recently shown signs of strength, with GDP growth averaging 6.9% and inflation contained at 3.9% as of June 2025. However, rising foreign currency obligations by public agencies have continued to exert undue pressure on the Uganda Shilling, particularly in the context of long procurement cycles.
For instance, international procurement under open bidding takes an average of 237 days—nearly eight months—according to the Public Procurement and Disposal of Assets Authority (PPDA). Over such a long lead time, fluctuations in forex markets can significantly inflate final payment costs if transactions are pegged to foreign currencies.
“This lag between contracting and payment introduces massive currency risk,” said Ggoobi. “It means more shillings are needed at the point of payment, pushing up project costs and stressing the national budget.”
Implications for Government and the Private Sector
The policy is expected to reduce Uganda’s demand for foreign currency in public transactions, stabilize forex markets, and strengthen confidence in the local unit. At the same time, it will require vendors, especially international contractors, to reassess their pricing and risk models.
“Even contracts under International Competitive Bidding must now be quoted in Uganda Shillings,” the PSST said. This could challenge foreign firms accustomed to dollar- or euro-denominated contracts but presents an opportunity to deepen local financial markets and encourage the use of hedging mechanisms.
What Comes Next
Ggoobi warned that compliance is non-negotiable going forward. Accounting officers have been reminded that violations will result in sanctions, and payment approvals will be withheld for non-compliant contracts.
“This is about more than accounting. It is a statement of economic independence and responsibility,” Ggoobi concluded.
As Uganda moves to implement its Ten-Fold Growth Strategy and position itself as a regional trade and investment hub, protecting the credibility and competitiveness of its currency has become a critical national priority.
The message is clear: the era of foreign currency procurement in government is over. The Uganda Shilling is back at the centre of the republic’s financial and fiscal architecture.