Why the Ugandan Shilling is Weak

Of course, nobody really earns a single shilling a day. However, the exercise forces us to confront an uncomfortable reality: how weak local currencies are compared to the global average, and how much more difficult it is for people in some nations to earn what others spend carelessly. 

Trade deficits, inflation patterns, and investor confidence are some of the fundamentals that are reflected in Uganda's exchange rate. 

Trading Economics report that as of May 2025, Uganda's inflation rate was a respectable 3.8%. However, Uganda's limited foreign exchange reserves, reliance on imports, and external debt servicing have kept the shilling weak. Financial markets reflect these pressures, but 

they don't fully reflect the state of the economy.

The economy of Uganda is expanding. Its nominal GDP is approximately $1,340 per capita, or $64 billion. GDP increases to almost $187 billion, or $3,900 per person, when purchasing power is taken into account. This discrepancy demonstrates that the shilling's local purchasing 

power is higher than what its exchange rate suggests. Even though the shilling is depreciated overseas, goods and services in Uganda are reasonably priced in shillings. 

The informal economy in Uganda is where the real story is. According to World Bank estimates, it makes up between 33% and 51% of GDP and as much as 91% of all jobs. 

Street vendors, boda boda riders, farmers, and micro-entrepreneurs are among the people in this sector whose work hardly ever makes it into official economic statistics, much less global financial systems. 

The youth of Uganda are especially impacted. Just 3.2% of young people have formal wage-paying jobs, and youth unemployment is approximately 41%. The 

majority live outside of official safety nets and credit systems and depend on informal work to make ends meet. They frequently earn in shillings.

Therefore, even though the exchange rate might indicate that Uganda's economy is struggling, it ignores the country's resilience and productivity. The lack of value of a shilling is not the issue. 

Value is not recognized by the systems that determine world prices. This is the result of an international economy that is set up to reward holders of foreign currency while devaluing locally driven economies. 

Development initiatives must go beyond GDP and exchange rates if they are to be 

equitable. They must understand that a weak currency does not equate to a weak 

populace and that one shilling, despite its small size, symbolizes dignity, hard work and the silent strength of millions of people who drive Uganda's economy every day.