Ugandan businesses are facing renewed financial pressure following the Uganda Revenue Authority’s (URA) adjustment of the US dollar exchange rate used in customs valuation to Shs4,147.66, up from Shs3,881, a development likely to increase the cost of importing goods and place additional pressure on traders, manufacturers and consumers.
The adjustment represents an increase of approximately 6.9 per cent, meaning importers could now require more money to meet customs tax obligations, even where the dollar price of their imported goods has remained unchanged.
The development comes at a time when the Uganda shilling is experiencing significant pressure against the US dollar, raising concerns about the country’s import-dependent economy and the sustainability of businesses operating on tight profit margins.
For traders importing merchandise, electronics, machinery, construction materials, pharmaceuticals, textiles and other consumer products, the higher customs valuation could translate into increased importation costs.
Although URA has not necessarily increased the statutory tax rates, the higher exchange rate raises the Uganda shilling value of imported goods upon which applicable customs duties and other taxes are calculated.
This could leave businesses with two difficult choices: absorb the additional expenses and reduce their profit margins or transfer the costs to consumers through higher prices.
The development comes amid growing concerns from the Kampala City Traders Association (KACITA), whose chairperson, Isa Sekitto, has previously questioned the country’s economic response to the weakening shilling.
Sekitto has attributed the pressure on the local currency partly to Uganda’s heavy dependence on imports, high domestic taxes, declining regional trade and insufficient export earnings to generate the foreign exchange required by businesses.
He has argued that Kampala’s declining competitiveness as a regional trading centre has also weakened the country’s ability to attract foreign currency through merchandise trade.
According to Sekitto, Kampala previously attracted traders from neighbouring countries, including the Democratic Republic of Congo, Kenya and Rwanda, who purchased merchandise while supporting other businesses through accommodation, transport and hospitality services.
He has called for government to reconsider the cost of doing business, promote exports, revive regional trade and attract more foreign investment rather than relying excessively on monetary tightening.
Sekitto has also questioned the impact of the Bank of Uganda’s decision to increase the Central Bank Rate (CBR) to 12 per cent, warning that higher interest rates could make commercial borrowing more expensive and discourage businesses from investing in stock, expansion and production.
His concerns raise broader questions about whether Uganda’s current economic interventions are adequately addressing the difficulties facing the private sector.
The implications of the exchange rate adjustment extend beyond importers and could affect several sectors that collectively sustain Uganda’s commercial economy.
Import-dependent businesses are likely to face immediate pressure as they require more Uganda shillings to clear merchandise and replenish their stocks.
Traders dealing in electronics, clothes, household appliances, motor vehicle spare parts and hardware could experience higher operational expenses.
For businesses that have already committed to purchasing goods from international suppliers, the additional costs could disrupt cash-flow projections and reduce expected profits.
Uganda’s manufacturing sector also relies on imported machinery, industrial chemicals, packaging materials, spare parts and other production inputs.
A weaker shilling increases the cost of acquiring these materials, potentially forcing manufacturers to revise their product prices.
Businesses that cannot immediately transfer the additional expenses to customers could instead operate with reduced margins, scale down production or postpone expansion plans.
The construction industry could also face additional pressure because several building materials, specialised equipment, electrical installations and finishing products are imported.
Higher import costs could increase construction budgets, affect property developers and potentially make housing projects more expensive.
Small contractors, who often operate with limited financial reserves, could be particularly exposed.
Uganda imports petroleum products, making the energy sector particularly sensitive to movements in the exchange rate.
A weaker shilling increases the local currency required to purchase fuel and meet related international obligations.
If fuel costs remain elevated, transporters and distribution companies could revise their charges, increasing the cost of moving goods from ports and warehouses to markets across the country.
The additional costs could eventually affect food distribution, passenger transport and other essential services.
Importers of medicines, medical equipment, laboratory supplies and other healthcare products could also face higher procurement expenses.
Where businesses transfer the additional costs to customers, households could encounter more expensive medicines and healthcare services.
Small and medium-sized enterprises could be among the most vulnerable because many have limited access to affordable credit and depend on frequent stock replenishment.
Higher importation costs, combined with expensive commercial loans, could force some businesses to reduce stock, postpone expansion, cut operating expenses or reconsider recruitment.
If the situation persists, the consequences could extend to employment opportunities, household incomes and the purchasing power of consumers.
The exchange rate concerns are unfolding alongside the Bank of Uganda’s monetary tightening measures.
The Central Bank raised its policy rate from 9.75 per cent to 12 per cent in October 2026 in an attempt to contain inflationary pressure and support confidence in the shilling.
However, the intervention has also raised concerns about the cost of borrowing, particularly for businesses that depend on bank financing to purchase stock, finance production and expand operations.
While tighter monetary policy can help moderate inflationary pressures, businesses are concerned that higher borrowing costs could further constrain investment at a time when their operating expenses are already increasing.
The government has attributed the shilling’s depreciation partly to the imbalance between demand for and supply of foreign currency, particularly dollars required for petroleum imports and other international obligations.
Uganda’s challenge is no longer limited to the exchange rate displayed at banks and foreign exchange bureaus. It is increasingly about how currency instability affects the entire business environment.
When importation becomes more expensive, manufacturers face higher production costs, retailers struggle to maintain affordable prices and consumers lose purchasing power.
The consequences could also affect government revenue. Although a higher customs valuation may increase the shilling value of taxable imports, prolonged pressure on businesses could discourage importation, reduce trading volumes and affect economic activity.
There is also the risk that businesses could postpone investment decisions as uncertainty makes it difficult to establish reliable operating budgets and predict future costs.
On the other hand, exporters earning foreign currency could benefit from converting their dollar revenues into more Uganda shillings, although those relying on imported production inputs may not enjoy the full advantage.
Ultimately, the pressure raises questions about the resilience of Uganda’s private sector and the country’s dependence on imported goods.
As traders continue to call for lower business costs, stronger exports and the revival of regional commerce, government faces the challenge of balancing currency stability, revenue collection and the survival of businesses.
The central question remains whether Uganda’s business community can absorb another round of rising costs without passing the burden to consumers, reducing employment or scaling down operations.
