The Uganda shilling has strengthened against the US dollar after weeks of depreciation, offering relief to importers and policymakers who had feared deeper currency losses.
The local currency traded at 3,676.5/3,686.5 against the dollar on Wednesday.
That marked a strong recovery from nearly 3,780 three weeks earlier, when traders warned that the shilling could weaken beyond the 3,800 level.
Bank of Uganda figures show the shilling briefly appreciated to about 3,646 against the dollar earlier this week.
However, it later gave up some gains as demand for foreign currency increased.
Foreign exchange bureaus continued to quote higher retail rates on Thursday.
Some were selling the dollar at 3,720 shillings or more, reflecting continued demand in the retail market.
Dollar Demand Had Weighed on the Shilling
The shilling had faced pressure earlier this year as the US dollar strengthened globally.
Rising geopolitical tensions in the Middle East also pushed up oil prices, freight charges and demand for foreign currency among importers.
According to the Ministry of Finance, the shilling depreciated by nearly three percent in April compared to the previous quarter.
The ministry linked the depreciation to increased demand for dollars by manufacturers and energy companies financing higher fuel imports and shipping costs.
The pressure worsened after conflict broke out in the Middle East.
Uncertainty over oil supplies triggered volatility in global energy markets and raised concerns over Uganda’s import bill.
However, easing tensions and improved foreign exchange inflows have helped reverse some of the losses.
BoU Sees Oil, Mining and Tourism Boost
Bank of Uganda Governor Michael Atingi-Ego said the central bank expects the shilling to strengthen over the medium term.
He said commercial oil production, coffee exports, mining investment and tourism could improve Uganda’s foreign exchange position.
“The shilling could appreciate on the back of a significant and anticipated boost to foreign exchange inflows. Commercial oil production is expected to materialise in July 2026, with key infrastructure nearing completion,” he said.
According to the Governor, Uganda’s oil production infrastructure is now more than 95 percent complete.
He said additional inflows are expected from mining investments and tourism services linked to preparations for the 2027 Africa Cup of Nations, which Uganda will co-host.
“Beyond oil, sustained foreign direct investment into the mining sector and growing tourism services credits linked to AFCON preparations are expected to provide additional dollar inflows,” he said.
Coffee Earnings Continue to Support Currency
Coffee exports are also expected to support the shilling.
Uganda remains Africa’s largest coffee exporter and one of the world’s top ten coffee producers.
Bank of Uganda data shows coffee export earnings reached 2.4 billion dollars in the twelve months to mid-2026.
The earnings came despite a recent moderation in global coffee prices as production recovered in Brazil and Vietnam.
Analysts say strong coffee receipts remain important because they bring foreign currency into the economy and help ease pressure on the exchange rate.
Analysts Warn of Remaining Risks
Despite the recovery, analysts say the shilling remains exposed to global market developments.
Richard Nsubuga, Acting Head of Trading at Absa Bank Uganda, said renewed corporate demand for dollars and lower inflows had contributed to the shilling’s slight weakening in recent days.
“The Uganda shilling continued to trade under pressure, primarily driven by sustained corporate demand amid weaker dollar inflows. Additionally, offshore investor appetite for foreign currency remained elevated amid global dollar strength,” he said.
Global oil prices are also expected to influence the exchange rate in the coming weeks.
Brent crude has retreated after diplomatic efforts to ease tensions involving Iran.
Shipping through the Strait of Hormuz has also gradually resumed, helping calm global energy markets.
Lower oil prices could reduce Uganda’s import bill and ease demand for dollars.
However, analysts say it may take time before lower global oil prices affect domestic fuel prices and the wider economy.