Coffee Exports, Investor Inflows lift Uganda’s currency

The Ugandan shilling strengthened further in July 2025, marking its fourth straight month of appreciation against the US dollar, according to the Ministry of Finance’s latest economic report.

The currency gained 0.5 percent in July, trading at an average mid-rate of UGX 3,586.57 per dollar, up from UGX 3,605.84 in June. This follows steady gains since April, when the shilling began a consistent upward climb after a period of relative stability.

What drove the gains?

The report points to several factors behind the shilling’s performance. Increased foreign exchange inflows from offshore investors, remittances, and coffee export receipts helped shore up demand for the local currency. These inflows, the report notes, were supported by “well-coordinated monetary and fiscal policies.”

Globally, the US dollar continued to weaken against major currencies such as the British pound and the euro, a trend that also benefited Uganda’s currency. In July, the shilling appreciated by 0.6 percent against the pound sterling, though it lost 1.0 percent against the euro.

The steady appreciation has now placed the shilling at its strongest level in more than a year, easing pressure on import costs but raising questions about competitiveness for exporters.

Regional currency trends

Uganda’s performance fits into a mixed regional picture. The Tanzanian shilling gained 0.7 percent in July, supported by higher tourism and export receipts. Kenya’s shilling, by contrast, registered only a marginal 0.02 percent rise, while both the Burundian and Rwandan francs continued to depreciate.

Inflation and Policy Context

The stronger shilling came alongside slightly lower inflation, with headline inflation easing to 3.8 percent in July from 3.9 percent in June. Falling food crop prices and stable energy costs helped moderate price pressures.

Meanwhile, the Bank of Uganda kept its Central Bank Rate unchanged at 9.75 percent for the tenth consecutive month, maintaining its balance between controlling inflation and supporting economic growth.

Trade and economic signals

The appreciation comes even as Uganda’s trade deficit widened year-on-year, rising to USD 272.9 million in June 2025, as imports outpaced export growth. Merchandise exports, however, remain robust; growing by more than 64 percent compared to June 2024, driven largely by higher coffee, mineral, and fish earnings.

At the same time, business sentiment has held up, with the Purchasing Managers’ Index at 53.6 and the Business Tendency Index at 58.3, both pointing to continued optimism in the private sector.

Outlook

Uganda’s shilling has gained from both domestic fundamentals like strong coffee receipts and offshore investor participation in government securities and global conditions, including dollar weakness.

For the government and the central bank, the appreciation presents a balancing act. A stronger shilling supports price stability and lowers the cost of imports, but it also reduces export competitiveness at a time when Uganda is trying to expand its regional trade footprint.

For now, the currency’s steady climb underlines a period of relative stability in Uganda’s financial system, even as the widening trade deficit signals persistent external pressures