Experts are raising concerns over a potential economic slowdown in Uganda following policy shifts under the new Republican Trump-Vance administration.
A key factor driving this uncertainty is the strengthening of the US dollar against major currencies, including the Ugandan shilling, which could pose significant risks to the economy.
In January 2025, the Ugandan shilling depreciated by 0.7% against the US dollar, trading at an average mid-rate of Shs 3,688.96/USD compared to Shs 3,664.08/USD in December 2024.
According to economist Stephen Kaboyo, Managing Director of Alpha Capital, the appreciation of the US dollar began almost immediately after Donald Trump’s election.
“The moment Trump was elected, we saw the US dollar start appreciating significantly. This trend has continued, and it is having a marked effect on emerging market economies, particularly in Africa,” Kaboyo said.
The depreciation of the Ugandan shilling has been driven by increased corporate demand for the dollar, particularly from sectors such as energy, oil and gas, telecom, and manufacturing.
However, on a year-on-year basis, the Ugandan shilling showed resilience, strengthening by 3.1% from Shs 3,805.03/USD in January 2024 to Shs 3,688.96/USD in January 2025.
Beyond forex market volatility, Uganda is also feeling the impact of the suspension of key USAID funding, which has historically supported development and health initiatives.
Organizations such as the Infectious Disease Institute, The AIDS Support Organization (TASO), UNFPA, and the Presidential Malaria Initiative are among those affected.
Recently, USAID also announced an end to its funding for UNAIDS, a move that has drawn mixed reactions.
Ambassador Adonia Ayebare welcomed the cuts, stating on his X (formerly Twitter) account, “Thank you POTUS and Secretary Rubio.
The work of UNAIDS is not lifesaving; their work can be potentially done by our health ministries and Africa CDC.
UNAIDS has become a conveyor belt for contested cultural issues. PEPFAR is the real deal.”
However, the cuts have broader implications, particularly for employment.
Dr. Michael Atingi-Ego, Deputy Governor of the Bank of Uganda and Chairman of the Monetary Policy Committee, warned that the aid suspension and the strengthening of the US dollar could have adverse effects.
“The suspension of USAID funding will directly affect individuals employed in those sectors. The livelihood of thousands is at risk, and this will have a ripple effect on the broader economy,” he said.
The forex market has also felt the impact of these changes.
Dr. Adam Mugume, Executive Director of Research at the Bank of Uganda, noted that increased demand for dollars is creating instability.
The uncertainty has led to fluctuating exchange rates, posing challenges for businesses and consumers.
Despite these concerns, some economists remain cautiously optimistic. Dr. Robert Isabalija believes Uganda can cushion itself from the worst effects if appropriate measures are taken.
“While the Ministry of Finance has yet to quantify the full impact of these actions, it is clear that the government must act swiftly to mitigate the effects,” he said.
Most experts agree that without proper interventions, Uganda could face slower economic growth, rising unemployment, and further forex market instability.
While the Trump administration’s policies have sparked mixed reactions, their impact on Uganda’s economy is already evident.
The coming months will be crucial as the government navigates these challenges and works to safeguard economic stability.
