MUZIRA JOSHUA: Shilling at Record Lows: How Currency Weakness Is Squeezing Ugandan Households and Small Businesses

Small businesses and households dominate Uganda’s economy, but as the shilling weakens each day, hitting record lows and depreciating by about 12% or more against the American Dollar, the cost of living is rising faster than expected.

The weak Uganda shilling means imports arrive at high prices. As a growing economy, Uganda has industries that fully depend on imported materials; all the petroleum used nationwide is imported, and this directly affects the prices of commodities, leading to high costs of living because gas drives the biggest part of the economy compared to other sources of energy like solar and Hydroelectric Power.

Currently, the American dollar costs more than 4400 Ugandan shillings, and as a result, a liter of gas is about 7000 UGX. You need a moment to take it in, especially if you look at the current status microscopically because it could even go worse depending on the trend.

Meanwhile, this is good news for the exporters who are reaping a fortune and making massive profits, but they are the minority.

Let’s dive in to see the real impact of the expensive dollar and how it makes families and small businesses struggle for survival.

What is making the dollar stronger than the Ugandan shilling? Well, there are several factors, such as high global oil prices, capital outflows, and the widening trade deficit, where we are importing more than we export; importers are demanding more of the dollar, and some external factors.

Bank of Uganda is deploying all efforts to contain the situation: recently, in October, it increased its interest rates to 12% as a means to contain inflation, which is almost 5%. In September, inflation rose from 4.1 to 4.6

Impact on households or families

Reduced purchasing power: Prices of most products are becoming expensive; for instance, the bakers association just announced that since wheat prices have gone up to the roof, a loaf of bread which was costing about 5000 UGX, will now go for about 8000 UGX with effect from November, 2026. This implies that the families that wish to buy bread, most especially as tea escort, cannot afford it because probably their salaries are fixed with no changes in remuneration.

Food crop inflation: Globally, oil prices are rising, with a liter of diesel now costing more than 7000 UGX. The farmer invests more in logistics or transportation to bring the produce to the market, and in order to increase his margin, they increase the price of the crops, causing abnormal change in the price which you can term as inflation. It is not good news for households when vegetables, grains, and other crops are expensive.

Transport and energy: The majority of our people use boda bodas and matatus as their main means of transport, and since gas prices are high, the fares for the different journeys increase. A journey that cost 1000UGX now costs 1500UGX or more. This affects the daily operations since many households are on fixed budgets, and as President Museveni usually says, many Ugandans work only for the stomach “kida kyonka,” so any slight change in the prices greatly distorts the households’ financial stability.

Furthermore, if the situation persists this way, some employees are on the verge of losing their jobs because the employers, instead of carrying the burden of paying the workers late or cutting their pay, will be let go so that the company survives through this period.

Impact on small businesses

Higher input and restocking costs: Business owners and importers now need more shillings to purchase the same dollar-priced raw materials, machinery, and services. For example, industries like pharmaceuticals, steel, and ceramics depend mainly on imported raw materials, so these are already affected because it becomes very expensive to bring in the materials, which takes me to the second point.

Margin squeeze: small and medium enterprises face another hurdle and are caught in the valley of decisions of whether to raise the prices of their goods or to absorb costs and end up with little profit or even losses. The raw materials are becoming expensive, so the company must decide whether to increase the price or cover the costs; many of which are even forced to shut down, most especially the cottage industries.

Higher financing costs: As one of the means the Uganda Central Bank has taken to calm this economic crisis was to increase the Bank Rate to about 12%, this means that the small businesses cannot get the desired loans because they are now expensive based on the interest rates.

However, the weak shilling is good news to the exporters because they are getting more shillings in return for their goods and services. For example, the tourism, coffee, and tea farmers are reaping big from this situation. This calls on the government to put more effort into value addition and exporting more goods and services, thereby bringing in more dollars, and that’s how the shilling will gain strength against the dollar.

But what should the regular Ugandan do in this period? One is by spending only on essentials and cutting expenses in a way that, if you can go without certain things, please don’t spend a penny on them.

Secondly, Ugandans should use more of the informal credit from community saving groups, like Pewosa, that can extend a hand to the SMEs until we recover from this situation.

Thirdly, if the enterprises can use local raw materials instead of the imported ones, the better. Industries like textiles can use fabric from nytil.

In conclusion, the weak shilling affects households and SMEs because they are the majority, and this shapes how we live life, how we spend, and how we invest. Much as there are some external factors like global oil prices, as a country, we should do better with prudent monetary policies, export more by boosting domestic trade, reduce imports, and boost tourism more because, being the Pearl of Africa, Uganda has the ability to make billions of dollars from tourism.

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