Uganda’s financial markets remained upbeat in July 2025 as the Ugandan Shilling continued its steady appreciation against the US Dollar for the fourth consecutive month.
According to the Performance of the Economy Monthly Report by the Ministry of Finance, Planning, and Economic Development, the local currency strengthened by 0.5 percent, trading at an average mid-rate of UGX 3,586.57 per US Dollar, compared to UGX 3,605.84 recorded in June 2025.
This positive performance came on the back of increased foreign exchange inflows from offshore investors, rising coffee export earnings, and strong remittance receipts from Ugandans living abroad.
The report also attributes the gains to well-coordinated fiscal and monetary policies by the government and the Bank of Uganda (BoU), which have supported macroeconomic stability and investor confidence.
One of the biggest contributors to the Shilling’s resilience was the surge in foreign exchange inflows. The report highlights that remittances from the Ugandan diaspora remained strong in July, buoyed by a recovering global economy and improved employment opportunities abroad.
At the same time, offshore investors continued to inject capital into Uganda’s financial markets, seeking attractive returns from government securities.
Additionally, coffee export receipts Uganda’s single largest source of foreign exchange rose sharply. Earnings from coffee exports surged by 78.4 percent year-on-year, driven by both higher production volumes and favourable international prices.
Uganda exported over 1 million 60kg bags of coffee in June 2025 alone, cementing its position as one of Africa’s leading coffee producers.
These inflows helped ease pressure on the Shilling while boosting the country’s foreign exchange reserves, providing the Bank of Uganda with stronger buffers against potential external shocks.
The appreciation of the Ugandan Shilling also mirrors broader regional and global trends. Within the East African Community (EAC), Uganda’s currency gained 0.5 percent in July, aligning closely with Tanzania’s Shilling, which appreciated by 0.7 percent, while Kenya’s Shilling posted a marginal gain of 0.02 percent.
However, Rwanda’s Franc and Burundi’s Franc continued to depreciate, weakening by 0.5 percent and 0.18 percent respectively.
On a global scale, the Shilling’s performance was partially supported by a broad weakening of the US Dollar against major international currencies such as the British Pound and the Euro.
In July, the Shilling also appreciated by 0.6 percent against the Pound, trading at an average rate of UGX 4,893.36 per GBP, although it slightly depreciated by 1.0 percent against the Euro, settling at UGX 4,201.54 per EUR.
These movements reflect shifting investor preferences towards emerging markets and resource-driven economies, where returns remain more attractive compared to advanced economies.
The Bank of Uganda maintained its Central Bank Rate (CBR) at 9.75 percent for the tenth consecutive month in July 2025, signalling confidence in the economy’s stability.
The unchanged policy stance aimed to balance the dual objectives of containing inflation within the medium-term target of 5 percent while supporting private-sector-led economic growth.
The report also shows that yields on government securities declined across several maturities, suggesting strong investor appetite. For instance, yields on the 91-day Treasury Bill dropped to 11.6 percent from 12.0 percent in June, while the 364-day Treasury Bill eased to 15.3 percent from 15.6 percent.
Similarly, yields on long-term government bonds also fell, with the 10-year tenor bond decreasing to 17.10 percent and the 20-year tenor edging down to 17.90 percent.
The oversubscription of government securities, reflected in an average bid-to-cover ratio of 1.77, indicates that investors remain confident in Uganda’s debt instruments and economic outlook. This influx of foreign and domestic capital continues to bolster demand for the Shilling.
Uganda’s export performance has been a key driver of the Shilling’s strengthening trend. Merchandise exports soared to USD 1.15 billion in June 2025, up from USD 702.5 million in the same period the previous year a 64.3 percent year-on-year growth.
Coffee led the surge, but other commodities, including mineral products, fish, tea, and flowers, also contributed significantly.
The Middle East remained Uganda’s largest export destination, accounting for 34.8 percent of total exports, with the United Arab Emirates (UAE) absorbing nearly all shipments from the region. The East African Community came second, taking in 24.9 percent of exports, followed by the European Union and Asia.
Despite this strong performance, Uganda’s overall trade deficit widened to USD 272.9 million, as import growth outpaced export earnings. Imports, particularly of machinery, vehicles, textiles, and beverages, rose to USD 1.43 billion in June 2025.
Nevertheless, the rising export receipts provided sufficient foreign exchange to cushion the local currency against depreciation.
Uganda’s improving macroeconomic fundamentals have fueled growing optimism among investors and business leaders. The Business Tendency Index (BTI) stood at 58.3 in July, reflecting positive sentiment about the next three months, including expectations of higher order volumes, employment growth, and better profitability.
Similarly, the Purchasing Managers’ Index (PMI) remained above the critical 50-point threshold at 53.6, signaling continued expansion in private-sector activity despite a slight dip from 55.6 in June. Sectors such as construction, services, wholesale and retail trade, and agriculture led the gains, while manufacturing lagged slightly due to higher input costs.
This sustained confidence is feeding back into financial markets, attracting both foreign and domestic investors who view Uganda as a relatively stable destination in a turbulent global environment.
Inflation trends in July further reinforced the positive macroeconomic outlook. Annual headline inflation eased to 3.8 percent, down from 3.9 percent in June, driven largely by a decline in food prices and stable energy costs.
Food crop inflation fell to 3.2 percent, helped by improved supplies of vegetables, tomatoes, citrus, peas, and cabbages, while energy, fuel, and utilities inflation stabilized at 0 percent.
The government’s decision to grant the Uganda National Oil Company (UNOC) the sole mandate to import fuel continues to support price stability, ensuring consistent supply and shielding consumers from volatility in international fuel markets.
Coupled with deliberate reductions in power tariffs, these policies are helping to maintain a favorable environment for both households and businesses.
Stable inflation and consistent monetary policies have enhanced investor trust in the Shilling and are expected to sustain currency stability in the short to medium term.
Despite the positive developments, the report highlights several challenges that could weigh on the Shilling’s performance in the coming months. Chief among them is Uganda’s widening trade deficit, particularly with East African Community partners.
The deficit with the EAC nearly doubled to USD 209.5 million, partly due to rising imports and non-tariff barriers imposed on Ugandan products such as fish, dairy, onions, potatoes, and tiles.
Global risks also remain significant. A stronger rebound of the US Dollar, potential geopolitical disruptions, or a slowdown in global demand could reduce export earnings and remittance inflows, thereby putting pressure on the local currency.
Looking forward, the Ugandan Shilling’s performance will largely depend on the balance between foreign exchange inflows and import demand. With robust export earnings, steady remittances, and sustained investor confidence, the currency is expected to remain stable in the near term.
The Bank of Uganda is also likely to maintain its supportive monetary policy stance, while fiscal discipline and continued efforts to diversify export markets could strengthen Uganda’s resilience against external shocks.
For investors, forex traders, and businesses engaged in cross-border transactions, the Shilling’s steady appreciation signals a period of relative currency stability and underscores Uganda’s position as a promising frontier market within East Africa.
