Uganda's Finance Minister has outlined a strategy combining spending restraint, higher interest rates and increased domestic production to address the weakening shilling, as external pressures including rising global crude oil prices and Middle East instability add to currency market strain. Speaking on NBS Television's Morning Breeze programme, Henry Musasizi urged Ugandans to remain calm, saying the government would pursue sustainable policies rather than temporary interventions. The shilling's depreciation creates particular challenges for importers who need dollars to purchase fuel, machinery and industrial inputs; when the local currency weakens, importers must spend more shillings to obtain the same amount of foreign currency, potentially raising production costs and consumer prices.
On the monetary front, the Bank of Uganda has raised the Central Bank Rate to 12 per cent and increased the Cash Reserve Ratio as part of efforts to contain inflation and manage liquidity in the financial system. The higher policy rate can encourage saving and moderate credit growth, though it also makes borrowing more expensive for businesses and households seeking to expand operations or finance working capital. Musasizi cautioned against relying on subsidies or drawing down foreign exchange reserves, arguing that such short-term interventions would not provide a lasting solution to the underlying economic pressures.
The government's fiscal response will focus on restraint in spending, prioritising essential expenditure and productive investments while reducing non-essential costs. Musasizi said public resources would be directed towards unavoidable obligations and activities that contribute directly to economic growth, with the government minimising domestic and international travel and conducting some official meetings virtually to reduce transport and accommodation spending. For the private sector, tighter government expenditure could reinforce fiscal discipline, though the broader economic impact will depend on how spending cuts are implemented and whether essential public investments are protected.
The long-term strategy centres on building productive capacity in sectors such as manufacturing, agriculture and agro-processing to generate more foreign exchange and reduce import dependence. By increasing domestic production and expanding exports, Uganda could earn more dollars and narrow the gap between foreign currency demand and supply. Musasizi said this approach would strengthen the country's resilience to external shocks, though the success of these measures will also depend on global developments, inflation management and investor confidence. For businesses and households, the immediate challenge involves managing potentially higher costs as the government and central bank pursue tightening measures, while longer-term stability will require expanding productive capacity and boosting export earnings.