Uganda Shilling finds stability in 2025 after years of pressure

Kampala — The Ugandan shilling closed 2025 on a stronger footing against the United States dollar, recording a 2.48 percent appreciation between December 2024 and December 2025, according to official exchange rate data.

Over the same period, the US dollar depreciated by 2.42 percent against the shilling, underscoring a year of relative currency stability in Uganda compared with several regional peers.

The performance marked a notable contrast with developments in neighbouring economies, where currencies continued to face depreciation pressures. In Kenya and Tanzania, exchange rates remained under strain from higher import demand, external debt servicing, and capital outflows, while Uganda’s shilling benefited from steadier foreign exchange inflows and contained volatility.

Economists say the shilling’s resilience reflects improving domestic fundamentals. “A near 2.5 percent appreciation may seem modest, but in a region where currencies have largely weakened, it signals relative macroeconomic strength,” said a Kampala-based economist. “Uganda entered 2025 with better export receipts and a more balanced foreign exchange position.”

Throughout the year, the foreign exchange market was supported by strong export earnings, particularly from gold and coffee, Uganda’s leading foreign exchange earners. Gold exports remained the single largest contributor to dollar inflows, while coffee shipments benefited from favourable international prices and increased volumes. Remittances from Ugandans abroad also provided a steady source of foreign currency, helping to cushion the shilling against external shocks.

A senior official familiar with monetary policy operations said the outcome reflected disciplined economic management. “The objective has been to maintain stability without distorting the market. The 2025 exchange rate performance shows that measured interventions, combined with strong inflows, can support the shilling,” the official said.

On the import side, moderated demand for fuel and capital goods helped limit pressure on the currency. The stronger shilling contributed to lower import costs, easing inflationary pressures on essentials such as fuel, industrial inputs, and consumer goods. This provided relief to manufacturers and traders, particularly in the construction, energy, and retail sectors.

However, exporters faced mixed effects. While higher global prices supported earnings, the stronger shilling slightly reduced local currency returns for exporters in price-sensitive markets. Analysts note that the impact was manageable due to the modest scale of appreciation and Uganda’s continued reliance on commodity-based exports.

Regionally, Uganda’s exchange rate performance in 2025 compared favourably with peers in the East African Community, reinforcing investor confidence in the country’s macroeconomic outlook. The shilling’s stability also helped maintain predictability for businesses and foreign investors operating in the Ugandan market.

As Uganda heads into the new year, economists caution that global financial conditions, commodity prices, and capital flows will remain key determinants of currency performance. Nevertheless, the 2.48 percent appreciation of the shilling in 2025 stands out as a positive year-end indicator, highlighting a period of relative resilience in Uganda’s external sector.