Finance Minister Henry Musasizi has urged Ugandans not to panic over the Uganda shilling depreciation, outlining plans to cut non-essential government spending, tighten monetary conditions and increase domestic production to ease pressure on the economy.
Speaking on NBS Television’s Morning Breeze programme, Musasizi attributed some of the currency pressure to rising global crude oil prices and the ongoing conflict in the Middle East, which he said had contributed to uncertainty in international markets.
“Stay calm, don’t panic,”Musasizi advised Ugandans.
The minister said the government was pursuing fiscal and monetary measures to address the economic pressures, while placing greater emphasis on producing goods locally and expanding exports to reduce reliance on imported products and foreign currency.
His remarks come as businesses and consumers face potential cost pressures from a weaker shilling, particularly where purchases depend on imported fuel, machinery and industrial materials.
Musasizi said the government’s approach would focus on addressing underlying economic challenges rather than relying on temporary interventions.
Uganda’s dependence on imports creates demand for foreign currency, particularly for petroleum products, industrial machinery, raw materials and other essential commodities.
When the shilling depreciates, importers need more local currency to purchase the same amount of dollars, potentially raising the cost of goods and production inputs.
The minister identified increased domestic production and export earnings as important parts of the long-term response.
He pointed to manufacturing, agriculture and agro-processing as sectors that could support local supply, increase value addition and create opportunities to sell more goods abroad.
The strategy is intended to help Uganda generate more foreign exchange while reducing its dependence on imported products.
However, Musasizi did not provide specific targets or a timeline for achieving these changes.
On public expenditure, Musasizi said the government would adopt a more restrained approach, directing resources towards essential obligations and investments that contribute to economic growth.
He said non-essential spending would be reduced as the government seeks to use limited public resources more efficiently.
The proposed measures include minimising domestic and international official travel, with some meetings expected to move online to reduce transport, accommodation and administrative expenses.
The minister did not disclose how much the government expects to save through these changes or specify when the spending restrictions would take effect.
The approach places emphasis on protecting funding for priority programmes and productive investments while cutting expenses considered less essential.
Its wider economic impact will depend on how the reductions are implemented and whether key public investments remain adequately funded.
Musasizi also pointed to monetary policy measures aimed at containing inflationary pressures and managing liquidity in the financial system.
He said the Bank of Uganda had raised the Central Bank Rate (CBR) to 12 per cent and increased the Cash Reserve Ratio.
The Central Bank Rate influences borrowing costs across the economy, affecting how much businesses and households may pay for loans.
Higher policy rates can help moderate credit growth and contain inflation, although they can also make borrowing more expensive for businesses seeking funds to expand operations or purchase equipment.
The Cash Reserve Ratio determines the proportion of commercial banks’ deposits that must be held as reserves with the central bank.
Increasing this requirement can limit the funds available for lending and help manage liquidity in the banking system.
Musasizi did not specify the new Cash Reserve Ratio, its previous level or the dates when the two monetary measures were introduced.
The figures cited by the minister were not accompanied by a separate statement from the central bank in the information available for this report.
The finance minister cautioned against relying on subsidies or drawing on foreign exchange reserves as the primary response to the current economic pressures.
Instead, he said the government would continue pursuing measures aimed at addressing the underlying causes of economic instability.
His position places greater emphasis on spending discipline, monetary measures and expanding the country’s productive capacity than on interventions intended to provide immediate relief.
For businesses that depend on imported inputs, the exchange rate remains an important factor in operating costs.
Higher borrowing costs could also affect firms seeking credit, while more expensive imported materials may put pressure on production expenses.
The extent of the impact on household budgets, business revenues and employment has not been quantified in the information provided by the minister.
The government intends to prioritise essential expenditure, encourage domestic production and expand exports as part of its efforts to strengthen economic resilience.
Musasizi said these measures would continue to form part of the response to the country’s economic challenges.
The extent to which they ease pressure on the shilling will depend partly on international market developments, inflation management and Uganda’s ability to generate foreign exchange through exports and investment. No specific deadline for stabilising the currency or target exchange rate was announced.
The Uganda shilling depreciation therefore remains an economic concern as the government pursues its stated strategy of fiscal restraint, monetary management and greater local production.
For now, Musasizi’s message to the public is to remain calm, while the longer-term response centres on strengthening domestic production and generating more foreign exchange rather than depending primarily on short-term relief.
