By David Mwanje
Uganda’s economy showed renewed momentum in November 2025 as inflation eased and business activity strengthened, supported by a sharp rise in exports, according to the latest monthly report from the Ministry of Finance, Planning and Economic Development.
Headline inflation dropped to 3.1 percent in November from 3.4 percent in October, remaining below the Bank of Uganda’s medium-term target of 5 percent. The decline was mainly driven by lower food prices, with annual food inflation easing to 4 percent from 6.1 percent. Core inflation edged down to 3.2 percent, while energy, fuel and utilities inflation rose slightly to 0.6 percent.
Economists link the lower inflation to seasonal harvests and relatively stable global commodity prices, offering some relief to households and giving policymakers space to support growth.
Business activity continued to improve, with key indicators showing expansion across several sectors. The Purchasing Managers’ Index rose to 53.8 from 53.4, pointing to stronger output and new orders in manufacturing, wholesale trade and services. Companies reported improved demand despite higher fuel and utility costs.
The Composite Index of Economic Activity increased to 183.50 in October from 182.40 in September, marking the third straight monthly rise. Business confidence also remained positive, with the Business Tendency Index at 57.2, though slightly lower than October’s 58.1 due to weaker expectations in agriculture and construction.
In the financial markets, the Uganda shilling came under pressure, depreciating by 3.2 percent against the US dollar to an average of 3,575.14, largely due to strong corporate demand for foreign currency. The Bank of Uganda kept the Central Bank Rate at 9.75 percent, saying it needed to balance growth and inflation control.
Lending rates increased during the period, with average shilling loan rates rising to 19.71 percent from 18.45 percent in September. Foreign currency loan rates edged up to 8.24 percent. Private sector credit grew modestly by 0.3 percent to 24.35 trillion shillings, mainly supported by shilling-denominated lending.
Government borrowing remained strong, with treasury auctions raising just over 2 trillion shillings. Treasury bill yields were mixed, with the 91-day and 364-day rates falling while the 182-day rate increased. Yields on longer-term bonds generally rose as investors demanded higher returns.
Uganda’s external sector recorded a marked improvement. The trade deficit narrowed by more than 70 percent year-on-year to 74.46 million dollars in October. Exports nearly doubled to about 1.5 billion dollars, boosted by strong performance in coffee, gold, cocoa and crude oil. Coffee earnings increased by 33 percent on account of higher export volumes.
Imports also rose by 53.8 percent to 1.57 billion dollars, driven mainly by higher imports of mineral products and base metals. The Middle East remained Uganda’s leading export destination, accounting for almost half of total exports.
However, fiscal pressures increased as the budget deficit widened to 2.87 trillion shillings, exceeding projections due to lower revenue collections and higher spending. Domestic revenues fell below target, while expenditure rose on goods, services and transfers to local governments.
Across the East African region, inflation eased in most countries, including Tanzania, Kenya and Rwanda. While some regional currencies strengthened slightly, the Uganda shilling remained under pressure.
