Africa-Press – Uganda. The Ugandan shilling recorded its strongest performance in months this week, trading at 3625/35 against the US dollar.
The currency’s appreciation was driven by a surge in foreign exchange inflows from offshore investors seeking to diversify their portfolios amid rising turbulence in global markets, particularly in the United States.
Market analysts say the shift in sentiment reflects growing caution among international investors about the stability of dollar-denominated assets. Ongoing concerns over the U.S. economic outlook, coupled with uncertainty around global trade dynamics, have prompted increased demand for frontier market assets, including those in East Africa.
“The uptick in foreign exchange flows presented a timely opportunity for the Central Bank to intervene and mop up excess dollars, which not only stabilised the market but also helped in building foreign reserves,” said Stephen Kaboyo, Managing Partner at Alpha Capital, a Kampala-based financial consultancy.
The Bank of Uganda was quick to capitalise on the favorable market conditions, purchasing dollars to bolster its reserve position—a move that enhances the country’s ability to cushion against future external shocks.
Globally, the U.S. dollar gained modest ground against major currencies after months of struggling under pressure from trade frictions and uneven economic data.
However, the recovery remains fragile and markets continue to price in risks of further volatility.
Back home, while the appreciation of the shilling offers short-term relief, financial experts warn that deeper structural issues remain unresolved.
Chief among them is Uganda’s fiscal position, with elevated debt levels raising red flags among both local and international observers.
“The elephant in the room is the government’s fiscal outlook,” Kaboyo noted. “While the shilling appears modestly stable now, markets are not blind to the underlying vulnerabilities, particularly the pace of public debt accumulation.”
Uganda’s public debt currently hovers above 50% of GDP, a level that continues to raise concern about long-term sustainability and the country’s ability to meet its repayment obligations without compromising economic growth.
As policymakers prepare the national budget for the next fiscal year, balancing economic stimulus with fiscal discipline will be critical. While currency stability is a positive signal, sustaining it will require robust macroeconomic management and credible debt strategies.
Source: Nilepost News
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