Uganda’s shilling emerges East Africa’s best-performing currency amid regional headwinds

Kampala/Uganda

Amid a turbulent regional currency landscape, the Ugandan shilling (UGX) has emerged as East Africa’s best-performing currency over the past four years, supported by sound monetary policy and stable external flows.

Performance at a glance

The nominal effective exchange rate (NEER) of the shilling appreciated by 3.5% year-on-year, while between 2021 and 2025 its average annual appreciation was 0.3% — outperforming all major East African trading partners.
By contrast:

The Rwandan franc weakened by 8.9% in the same period.

The Kenyan shilling lost around 4.9% vs the US dollar.

Drivers of the performance

Prudent monetary policy by Bank of Uganda: inflation and macro fundamentals remained stable, supporting currency strength.

External flows: Despite global headwinds, Uganda managed decent reserve buildup and import cover, which helped cushion the currency.

Regionally, neighbours faced heavier external debt pressures, weaker export earnings or structural imbalances, magnifying Uganda’s relative improvement.

Implications

A stronger shilling helps reduce inflationary pressure on imported goods and stabilises cost of living for Ugandans.

It boosts investor and consumer confidence and can attract foreign capital looking for stability.

However, a strong currency also makes exports less competitive — Uganda must balance currency strength with export growth.

Risks & considerations

Currency performance could reverse if export earnings slump (recent data shows Uganda’s export receipts fell by 15.4% in one month due to lower coffee, tea and flower shipments).

Rising public debt and potential external shocks (e.g., global inflation, commodity price swings) could challenge the shilling’s strength.

Over-reliance on stability might mask structural export and diversification issues — a stronger currency doesn’t fix those on its own.

What to watch

Monthly export and import trends, especially in key sectors like coffee, horticulture and base-metals.

How the Bank of Uganda manages exchange rate policy amid growing debt and external borrowing.

Whether the currency strength supports broader economic growth or masks back-end weaknesses in the export sector.