A quiet desperation is gripping Uganda’s financial nerve center as the local currency plummets to historic lows. On Monday, Bank of Uganda (BoU) indicative rates exposed the stark reality: the US dollar is aggressively suffocating the local currency, buying at Shs 4,429.76 and selling at a punishing Shs 4,439.76.
As businesses choke under the weight of rising transport, production, and consumer prices, a deeper systemic panic is unfolding behind closed doors. Highly vulnerable sectors—including fuel, heavy machinery, pharmaceuticals, and essential raw materials—are facing an existential threat as the cost of settling dollar-denominated debts spirals out of control.
In what appears to be a massive liquidity-moppping maneuver, the central bank has abruptly announced a colossal Shs 1.4 trillion Treasury bond auction scheduled for Wednesday, October 28. Officially, the BoU frames this as a routine reopening of existing government securities across two, five, 15, and 25-year tenors, dangling lucrative coupon rates between 15% and 16%.
While official notices avoid tying the auction directly to the shilling’s freefall, institutional analysts view it as an aggressive backroom effort to drain excess domestic liquidity and forcefully stabilize interest rates.
This multi-trillion-shilling move follows a drastic, emergency 2.25 percentage point hike to the Central Bank Rate (CBR) on October 14, bringing it to a restrictive 12 percent. Just over a week later, on October 22, the BoU was forced to burn through precious foreign exchange reserves, directly dumping dollars into the market to break a speculative run.
As the BoU burns through its ammunition, a controversial alternative strategy has leaked into policy circles, triggering intense debate on whether the central bank is mismanaging the crisis.
A tightly circulated policy paper dated October 23, titled Breakdown of THIRD PATH Measures to contain the weakening of Uganda Shilling, authored by Morrison Rwakakamba, the former Chairman of the Uganda Investment Authority, levels a tacit critique against the current regime’s heavy-handed tactics. Rwakakamba argues that the central bank’s predictable interventions are inadvertently fueling a dangerous psychological feedback loop.
“Sudden spikes in the dollar price are triggering panic buying by corporations and individuals trying to hedge against total depreciation,” a source familiar with the policy debates noted. This panic buying creates an artificial, self-fulfilling demand loop that further degrades the shilling.
Rwakakamba’s radical blueprint demands an immediate shift away from blind, open-ended market interventions:
Limit dollar injections to a strict maximum of $150 million for October and a combined $250 million for November and December to force market discipline.
Mandate the BoU to publish weekly disclosure logs detailing exactly how much foreign currency has been sold, allowing public oversight over depleting national reserves.
Establish a temporary, preferential dollar facility for importers of critical survival goods—fuel, fertilizers, life-saving medicines, and wheat. Non-essential luxury importers would be thrown to the volatile elements of the open market.
Implement punitive measures to make holding short-term dollar positions financially expensive, effectively freezing speculative hoarding.
The central bank currently stands at a critical crossroads. Relying solely on aggressive CBR hikes risks choking off domestic economic growth, while unmitigated dollar dumping threatens to deplete the country’s strategic foreign reserves. With the trillion-shilling bond auction looming, the coming days will reveal whether the state can regain control of its currency, or if speculative panic will continue to dictate the price of the Ugandan shilling.
