Uganda's Purchasing Power Drained by Six Compounding Economic Factors

Ugandans are grappling with a noticeable decline in their purchasing power, a trend that has led to reduced household spending and slower sales across various markets. Despite a projected economic growth of over 6 percent, consumer behavior indicates a significant squeeze on disposable incomes.

Several factors are contributing to this economic challenge. Seasonal supply shocks, particularly during dry seasons, have led to a sharp increase in the prices of essential commodities like broccoli and cucumbers. For instance, a sack of broccoli has seen its price skyrocket from between Shs80,000 and Shs100,000 to Shs350,000.

However, seasonality alone doesn’t explain the broader economic slowdown. Inflation is outrunning income growth, meaning that while people earn the same nominal amount, the real value of their money is diminishing. Fuel and utility costs have seen substantial increases, with liquid energy fuel inflation at 8.9 percent in June 2026 and domestic power tariffs also rising. This increased cost of essentials forces households to cut back on non-essential purchases, impacting sectors like cosmetics and clothing.

Furthermore, a tightening of government liquidity, particularly around the fiscal year-end closure, has reduced the money circulating in the economy. This is compounded by weaker export earnings from gold and coffee, which reduces the inflow of foreign currency and can put upward pressure on the cost of imports like fuel.

Economic experts also point to an uneven distribution of economic growth, with urban poverty rates differing significantly from rural areas, and a rise in multi-dimensional poverty despite a fall in income poverty. This suggests that while the economy may be growing on average, the benefits are not reaching all segments of the population equally.

This combination of factors creates a challenging feedback loop: reduced consumer spending leads to lower business activity, potentially resulting in job losses and further diminishing household incomes. The cumulative effect of these six pressures – seasonal supply shocks, inflation, a retreat to essentials, liquidity issues, uneven growth, and weak exports – is a significant drag on the purchasing power of ordinary Ugandans, even as the national economy grows on paper.

Source: https://www.monitor.co.ug/uganda/business/prosper/what-explains-the-low-purchasing-power—5553848