President Yoweri Museveni has called on Ugandans to reduce reliance on imported goods and prioritise locally made products, arguing that boosting domestic production is a more sustainable response to the weakening shilling than spending the country’s foreign exchange reserves to support the currency.
Speaking during Uganda’s 64th Independence Day celebrations at State House Entebbe on October 9, Museveni said he disagreed with Bank of Uganda Governor Michael Atingi-Ego’s proposal to intervene in the foreign exchange market by selling dollars to lower the exchange rate.
“The governor was suggesting that he spends our dollar reserves to bring the dollar price down and I don’t agree with it. It is not correct to squander our dollars,” Museveni said.
The shilling has lost more than 11 per cent of its value against the US dollar this year, with commercial banks quoting the dollar at approximately Shs4,090 buying and Shs4,100 selling on October 8, compared with Shs3,960 and Shs3,970 a week earlier.
Museveni said Uganda had about $6 billion in foreign exchange reserves, which should be preserved rather than used to finance imports of goods that could be produced locally or avoided altogether.
“It is not correct to sell them to people who want to import perfumes and dead people’s hair,” he said, urging consumers and businesses to cut unnecessary imports.
“Please minimise the imports. This is the answer. Import less, and buy more local goods,” he added.
The President attributed the pressure on the shilling partly to rising international fuel prices linked to conflicts in the Gulf, declining earnings from some exports, lower tourism receipts and capital outflows.
He questioned why Ugandans were surprised by rising fuel costs, given the international instability affecting global energy markets.
“Have you not been hearing about the wars in the Gulf? How are people surprised about the high cost of fuel?” he asked.
Museveni said Uganda had initially benefited from a fuel supply arrangement with Vitol, which offered relatively lower prices for several months after the country changed its procurement system and reduced reliance on Kenyan middlemen.
However, he said the continuing international uncertainty had made it difficult to maintain lower prices as global supply costs increased.
The President also cited falling coffee prices as another factor affecting Uganda’s foreign exchange earnings, saying improved production in Brazil had contributed to lower prices for Ugandan coffee.
He further pointed to foreign portfolio investors withdrawing funds from Ugandan government securities to seek higher returns in other markets.
“Those portfolio investors are quite opportunistic. They go where money is highest,” he said.
Despite the depreciation, Museveni argued that a weaker shilling could benefit exporters because they receive more local currency when converting their dollar earnings. Importers, however, face higher costs when paying foreign suppliers.
Bank of Uganda has attributed the pressure on the shilling to a combination of a stronger US dollar, changing global interest rates, capital movements, higher oil and shipping costs, weaker export prices and strong domestic demand for foreign currency.
The central bank has tightened shilling liquidity, raising the cash reserve requirement to 13.5 per cent effective September 24, while maintaining the Central Bank Rate at 9.75 per cent.
Bank of Uganda has also maintained that the exchange rate should be determined by market forces, with interventions intended to limit excessive volatility rather than defend a specific dollar price.
Museveni’s position places emphasis on strengthening local industries, increasing domestic production and reducing avoidable imports as part of efforts to ease demand for foreign currency while preserving the country’s reserves.