Written By | Staff Writer
The shilling has breached Shs4,100 to the dollar, diesel is above Shs7,000 a litre, and the President says a weaker currency is not all bad
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Agriculture
Uganda's shilling crossed a psychological line this week. Commercial banks quoted the currency at Shs4,090 buying and Shs4,100 selling against the US dollar on Wednesday, according to the Daily Monitor, a level the paper called a "historic rout". A week earlier the rate was about Shs3,960; in March it was Shs3,604. Reuters, as cited by Nile Post, reports the shilling has lost more than 11 percent since the start of 2026, the worst run in a decade.
What is new today is not the slide itself, which this series touched on when September inflation figures were published, but the policy choice behind it. On Independence Day, 9 October, President Yoweri Museveni told the nation at State House Entebbe that he is "totally against" a Bank of Uganda proposal to draw on the country's roughly $6 billion in foreign exchange reserves to prop up the shilling. Instead, he argued, a weaker shilling helps exporters, who "will earn more shillings", while "it is the importers who are affected". He urged Ugandans to buy locally made products and said the government would "minimize the imports".
For an agricultural economy, that statement raises a practical question: which side of the ledger is the Ugandan farmer on?
The fuel line on the farm budget
The most immediate transmission channel is fuel. The Ministry of Finance's August Performance of the Economy report put average pump prices at Shs6,529 for petrol and Shs6,647 for diesel. The Monitor now reports diesel beyond Shs7,100 a litre, and Nile Post says prices have reached Shs7,000 to Shs8,000 in some areas. Energy Minister Monica Musenero told Parliament on 7 October that the causes include shilling depreciation, international supply pressure and a Shs200-per-litre excise duty increase introduced in the 2026/27 financial year. Parliament has demanded a breakdown of the prices at which the Uganda National Oil Company supplies oil marketing companies.
Diesel is the fuel of the farm economy. It moves matooke from Mbarara to Kampala, runs the lorries that haul maize to Kenya and milk to processors, powers hired tractors and milling machines, and drives the pumps that farmers use in dry spells. Museveni blamed Gulf conflicts, shifting global capital flows and local health crises such as Ebola. He said a temporary arrangement with trader Vitol had shielded consumers for about four months, and that Uganda now buys petroleum products directly from international traders rather than through the earlier route via Kenya. The International Monetary Fund's July assessment, as reported by Nile Post, warned that exchange rate movements, energy prices and transport costs could push inflation above 5 percent in 2026/27. The Uganda Bureau of Statistics put September annual inflation at 4.6 percent, with food crop inflation at 4.5 percent, up from 2.1 percent a month earlier, so the cushion is already thin.
A higher transport bill is rarely paid by the trader alone. In most produce chains, transport costs are deducted from what the farmer is offered at the gate, or passed on to the urban consumer as higher food prices. Either outcome hurts, one the producer and the other the household that buys food.
Imported inputs: the quiet cost
Fuel is only part of the story. Fertiliser, agrochemicals, veterinary drugs, poultry feed ingredients and farm machinery are largely imported or priced off imports. When the shilling weakens, the shilling price of those goods rises even if the dollar price does not move. A recent Busia story, covered earlier in this series, showed poultry farmers already crossing into Kenya to buy feed and vaccines because of price gaps; a weaker shilling makes imported inputs dearer in either market for Ugandan buyers.
The government has tried to cushion the input side directly. The Ministry of Agriculture's free fertiliser programme, covering 173,913 bags for tea, coffee and cocoa, is one example, though its volume is small against national demand. Borrowing is the other pressure point. Dr Adam Mugume, the Bank of Uganda's director of research and policy, told the Monitor that lending rates average 18 to 19 percent a year, so any borrower, including an agribusiness financing seed, a cold room or a tractor, needs returns above that level. A currency under strain can push rates higher, not lower, as the central bank defends against inflation.
The exporter's upside, and its limits
The President's argument is not baseless. A farmer or exporter paid in dollars receives more shillings per dollar than a year ago. Coffee, the clearest example, is priced internationally in dollars. The Uganda Coffee Development Authority data cited by UG Business show August exports of 737,766 60-kilogram bags earned $181.7 million, with the average export price at $4.1 a kilogram, higher than a year earlier even as volumes fell 13.6 percent. The International Coffee Organization's composite price averaged 287.29 US cents a pound in August.
Yet the upside has to be set against what farmers were actually paid. Nile Post, reporting figures from Agriculture Minister Frank Tumwebaze, said robusta FAQ was fetching Shs11,500 to Shs12,000 a kilogram in the first half of September, down from Shs13,500 to Shs14,000 a year earlier, a fall of 14.5 percent, even as arabica parchment rose about 8.5 percent. Those prices were recorded before the latest leg of depreciation, so the currency effect may only now be feeding through. If international prices hold, a shilling at Shs4,100 instead of Shs3,700 would, in principle, raise the shilling value of a dollar-priced bag by roughly 11 percent. Whether farmers see that depends on the margin captured by buyers and exporters between the world price and the farm gate. That pass-through is an inference rather than a measured figure; the farm-gate numbers for October will show whether it is happening.
The benefit is also narrow. Coffee, tea, cocoa, fish and horticulture sell for dollars. Maize, beans, matooke, cassava, milk, and most of what smallholders grow, sell in shillings to local and regional buyers. Cross-border grain and livestock trade with South Sudan, Kenya and the Democratic Republic of Congo is often settled in a mix of currencies, and is already disrupted by the Ebola alerts and border tensions covered in recent days. For these farmers, a weak shilling mostly means dearer inputs and transport without a matching boost in the price of what they sell.
Value addition and the import-substitution test
Museveni's call to buy local and cut imports is, in principle, good news for domestic producers, especially those who supply processors. Uganda spends heavily on imported edible oil, sugar substitutes, wheat and dairy-related products. Earlier in this series, the shortfall in oilseed supply was put at roughly 370,000 tonnes a year against national demand of 450,000 tonnes. A currency that makes imports dearer improves the economics of domestic soybean, sunflower and groundnut processing, if farmers can supply the volumes and quality required.
But import substitution cannot be ordered into existence. It requires seed, financing, working mills and reliable power. At the 32nd Uganda International Trade Fair in Kampala, which opened on 10 October, the Monitor found that eight in ten exhibitors interviewed said formalising their business added costs, and that obtaining an electricity connection took more than a month. A BoU official described the cost of doing business as a "perfect storm". Those frictions fall on agro-processors too.
What to watch
Four indicators will show how this plays out for farmers. The first is the October farm-gate coffee price, which will reveal whether the currency gain is passing through. The second is the next UBOS inflation print, particularly food crop and transport components. The third is whether Parliament's demand for a breakdown of fuel pricing leads to any relief in duties or margins. The fourth is whether the Bank of Uganda adopts alternative tools, such as tighter liquidity or targeted interventions, now that reserve sales have been rejected by the President.
The wider lesson is that currency policy is farm policy. A weaker shilling is not simply good or bad for agriculture: it redistributes income between dollar earners and shilling earners, between exporters and input buyers, and between rural producers and urban consumers. Farmers selling coffee through a well-run cooperative or buyer may gain. A maize grower paying for diesel, fertiliser and transport probably will not. How far the state steps in, through input support, transport relief, credit and storage, will decide which group the policy ends up favouring.
