The Kampala City Traders Association has blamed high taxes, declining regional trade and weak export earnings for pressure on the Ugandan shilling, arguing that the Bank of Uganda should pursue a broader policy response beyond raising its benchmark interest rate. Isa Sekitto, KACITA chairperson, said Uganda's heavy dependence on imports had made the economy vulnerable to fluctuations in the dollar. He called for measures including export promotion, tax reductions and tourism development alongside any monetary policy changes.
Sekitto argued that relying heavily on an increase in the Central Bank Rate could harm businesses by making borrowing more expensive. He said higher interest rates would prompt commercial banks to raise lending rates, increasing costs for traders and other businesses seeking to finance stock purchases and expansion. Businesses already struggling with high operating costs could find it harder to invest if borrowing became more expensive, he warned. Sekitto acknowledged that monetary tightening could help address inflationary pressures but said it should be paired with measures to expand exports, attract tourists and restore regional trade.
The KACITA chairperson pointed to Kampala's former role as a regional trading hub, saying high taxes had made it more expensive for traders from neighbouring countries to source goods from Uganda. He said the city previously attracted buyers from the Democratic Republic of Congo, Kenya and Rwanda, who purchased imported merchandise alongside locally produced goods and used services such as transport, accommodation and hospitality. This regional trade generated foreign exchange and supported businesses beyond the import sector, Sekitto said. He described the loss of this position as 'when the price is shot higher than any other partner in the East African Community, Uganda lost the Dubai facility'.
Sekitto attributed weaker export earnings to seasonal factors affecting agricultural production and international market conditions, including increased competition from Brazil in commodity markets such as coffee. He acknowledged that external developments, including the Russia-Ukraine war and tensions involving the United States, Israel and Iran, could affect international trade and currency movements. However, he said the government should prioritise domestic factors that can be addressed through policy changes.
Sekitto also raised concerns about a law recently passed by Parliament, arguing that it could discourage foreign direct investment by making prospective investors hesitant to commit capital to Uganda, though he did not identify the specific law. He called for a coordinated response combining monetary policy, tax measures, export development and efforts to attract regional buyers back to Kampala. Restoring Uganda's competitiveness as a regional trading centre would help generate foreign exchange while supporting employment and domestic economic activity, he said.
The remarks come amid concerns about exchange-rate volatility and the cost of importing goods, which can affect traders' operating expenses and the prices paid by consumers. However, Sekitto did not quantify the contribution of high taxes, declining regional trade or weaker export earnings to the shilling's recent movements.