Uganda Shilling Weakens 3.2% Against Dollar in July Amid Geopolitical and Economic Pressures

The Uganda shilling experienced a notable depreciation of 3.2% against the US dollar in July 2026, marking a 1.3% weakening on a quarter-on-quarter basis, according to the Bank of Uganda (BoU).

This decline was primarily attributed to bearish market sentiment stemming from renewed hostilities in the US-Iran conflict. The situation was exacerbated by a heightened demand for US dollars from key sectors including oil, manufacturing, and telecommunications when compared to the same period in the previous year.

Despite the year-on-year and quarter-on-quarter depreciation, the shilling saw a slight month-on-month strengthening in July, appreciating by 0.2%. This monthly gain was bolstered by robust inflows of US dollars from Uganda’s mining and energy sectors, alongside agricultural export proceeds and remittances.

The central bank noted that despite recent pressures, the Uganda shilling has remained relatively resilient against the US dollar over the past five years. This resilience, however, was tested by broader international market dynamics.

Earlier in the year, similar pressures were observed. In May 2026, the shilling had depreciated by 3.0% year-on-year, 4.7% quarter-on-quarter, and 1.3% month-on-month. At that time, increased corporate demand from the manufacturing and energy sectors, coupled with uncertainty surrounding the US, Israel, and Iran conflict, amplified depreciation pressures, further compounded by a broader international appreciation of the USD.

Richard Nsubuga, Acting Head of Trading at Absa Bank Uganda, also highlighted the influence of capital movements ahead of general elections. Offshore investors reportedly hedged their foreign exchange positions after successful investments in Ugandan government bonds, particularly following bond purchases in late 2025. The Middle East crisis intensified these pressures from March 2026, as investors reduced exposure to emerging markets, shifting funds into safer assets. While remittances and export earnings provided some buffer, they were insufficient to counter the strong demand for hard currency.

Furthermore, rising global energy prices contributed to increased transport and business costs, adding to inflationary pressures and consequently boosting the demand for foreign exchange. The combination of geopolitical tensions, corporate dollar demand, offshore capital shifts, and increased energy costs has collectively weighed on the Uganda shilling.