By Our Reporter
NATIONAL/ECONOMY
Bank of Uganda Deputy Governor has highlighted four key factors that are determining the current strength of the Uganda currency.
Professor Nuwagaba Augustus took to his X-Handle on Saturday, 20th December, 2025 where he explains, “The Complex Beast.”
According to the learned Economist, the term ‘complex beast’ best describes currency strength because its value is determined by a complex interplay of numerous, often interconnected factors rather than a single metric.
He says currency strength is a barometer of a nation’s overall economic health and market sentiment adding that it is not static, but rather a dynamic one, and constantly shifts in response to global events and domestic policies.
These are his insights on the determinants of currency strength;
Export sector performance: A country’s export performance is a major factor. Think about, for instance, Uganda’s coffee, gold, cocoa, milk, beef, fish, flowers, tourist arrivals and export labour; the more we sell those products or attract more tourists and export more skilled labour, the stronger our shilling. Why? Because all these create inflows in form of foreign exchange or hard currency. Uganda earned a record $4.2 billion from gold exports in the Financial Year (FY) 2024/25.
Remittances: Money that is sent by Ugandans working abroad provides a vital cushion, and this supports the shilling’s stability. Available statistics show that remittances in Uganda reached $ 1.4 billion in FY 2024/25.
Monetary Policy: At the Central Bank, we have had smart actions such as managing interest rates and keeping inflation in check. We maintained the Central Bank Rate (CBR) at 9.75% and this has helped in curbing inflation. Sound macroeconomic fundamentals, such as rising exports and managed inflation, have helped boost confidence in the shilling.
Foreign Direct Investment: Inflows from investors abroad (FDI), especially in energy and infrastructure, have greatly helped in supporting the shilling. Uganda’s oil sector has attracted significant investment, enhancing economic prospects.
“From the above illustration, it is evident that a strong currency is driven by a mix of domestic performance and global dynamics. The implication is that Uganda’s economic fundamentals are solid, but we must focus on sustainable growth,” he says.
