Uganda’s open currency policy and the decline of the shillings

By Wabusimba Amiri

In recent years, Uganda’s economy has grappled with a troubling trend: the persistent depreciation of the Ugandan shilling against major foreign currencies. As of mid-2025, one US dollar exchanges at over 3,500 shillings—a figure that continues to climb with little resistance. This situation raises concern among economists, local business owners, and patriotic Ugandans who see a worrying lack of protection for Uganda’s monetary sovereignty.

Unlike nations that have enacted stringent laws to preserve the authority and utility of their domestic currency, Uganda operates a liberal foreign exchange system so open, in fact, that the use of foreign currencies such as the US dollar, euro, and even the Kenyan shilling is increasingly prevalent in real estate, hospitality, tourism, and local trade.

In parts of Kampala and beyond, transactions are routinely priced and paid in dollars. What does this mean for the Ugandan shilling—and, by extension, for the country’s economic independence? We are, in effect, hawking our local currency, peddling it in the open market with little regulation or pride. The Ugandan shilling is treated not as a sovereign tool of national economic identity but as a street product, steadily losing its meaning and authority in everyday commerce.

The more we accept to trade our local currency like a commodity—like groundnuts sold in the market—the more it loses value. When you treat the shilling as an ordinary product, you open the door to speculation, instability, and depreciation. Our currency is not merchandise to be haggled over; it is the backbone of our economic sovereignty.

Foreign exchange trading is not only legal in Uganda—it is a booming business. On almost every major street in Kampala and other urban centers, licensed and unlicensed forex bureaus offer instant exchange services. While this supports tourism and international trade, it also opens the floodgates to currency speculation and dollar hoarding.

The psychological impact is equally damaging. Ugandans are beginning to perceive the shilling as weak and unreliable, and this perception can quickly become reality. When businesses start demanding dollars or euros, it sends a clear signal: the shilling is not good enough. This undermines trust in our currency and fuels further depreciation.

Looking beyond our borders shows how other nations defend their currencies. In China, foreign currency use is tightly controlled, with the yuan as the only legal tender for domestic transactions. Foreign currency dealings must be conducted through official channels under regulatory scrutiny, preserving the yuan’s central role.

India also restricts foreign currency use; under the Foreign Exchange Management Act, the rupee is non-convertible for domestic transactions, and all foreign exchange must be declared and processed through registered institutions. Tanzania, Uganda’s East African neighbor, requires government contracts and business transactions to use the Tanzanian shilling exclusively, helping prevent dollarization and protect its value.

Egypt provides an innovative example: specialized ATMs that facilitate foreign currency exchange in a controlled and transparent environment under the Central Bank’s supervision. This technology-driven approach strengthens monetary policy enforcement and public confidence.

In contrast, Uganda has thrown open the gates to foreign currency use without robust regulatory guardrails. While liberalism attracts investment, it also renders Uganda vulnerable to capital flight, dollar hoarding, and parallel economies. High-end landlords, car dealerships, tourism services, and major retailers price goods in foreign currency, ignoring the shilling altogether.

This creates a dual economy where a privileged few operate in dollars while the average citizen, earning in shillings, is shut out. Worse still, it makes government fiscal planning unpredictable and weakens the central bank’s ability to control inflation.

As a country, we must assert our monetary independence now. The Bank of Uganda should lead the process of declaring the Ugandan shilling the only legal tender for all domestic transactions. Laws must be enacted and enforced to restrict foreign currency dealings to licensed, regulated banks and digital platforms. Business operators must be guided—and held accountable—to operate within this policy shift.

This does not mean rejecting global trade or foreign investment. Rather, it means protecting Uganda’s ability to negotiate on its own terms, using its own currency as a respected player in regional and international markets.

Uganda, with its vibrant youth population and ambitious development goals, cannot continue to depend on foreign currency for domestic transactions. The current trend is not just unsustainable—it is dangerous. We must stop hawking our local currency.

The shilling is not merchandise. It is a symbol of our national identity, a pillar of our economic security, and a tool for policy control. If we fail to treat it with the dignity and discipline it deserves, no one else will. The time is now to restore its strength before it is completely priced out of the very economy it was meant to serve.

Wabusimba Amiri is a communication specialist, diplomatic scholar, journalist, political analyst, and human rights activist. (Tel: +56775103895 / Email: [email protected])