KAMPALA, August 20, 2025 – Uganda’s economy showed continued resilience in July 2025, supported by stable inflation, robust private sector activity, and prudent fiscal operations, according to the latest Monthly Economic Report from the Ministry of Finance, Planning and Economic Development [MoFPED].
Inflation trends offer encouraging signs
The report released today in Kampala indicates that headline inflation eased slightly to 3.8 percent in July, down from 3.9 percent in June, primarily due to a decline in food crop prices. A strong harvest season led to price reductions for key staples such as cabbages, tomatoes, peas, and citrus fruits, helping to ease pressure on household spending.
Core inflation also declined marginally to 4.1 percent, driven by falling costs in services such as transport and accommodation. The Ministry attributed the drop to continued decreases in fuel prices and stable electricity tariffs. “Government reforms in the fuel importation regime, managed by the Uganda National Oil Company [UNOC], are playing a key role in maintaining cost stability,” the report noted.
Economic activity accelerates
Economic momentum picked up, with the Composite Index of Economic Activity [CIEA] increasing by 1.1 percent in June, a marked improvement from the 0.3 percent growth recorded in May.
Private sector confidence remained strong, as reflected in the Purchasing Managers’ Index [PMI], which posted 53.6 – comfortably above the 50-point threshold indicating expansion. While this was a slight dip from June’s reading of 55.6, the Ministry explained it was “largely due to rising input costs.” Despite this, “employment and output grew across all sectors except manufacturing.”
The Business Tendency Index [BTI] also painted a positive picture, standing at 58.3. The Ministry noted that this figure reflects “sustained optimism regarding future orders and employment across agriculture, services, construction, manufacturing, and retail.”
Stable Shilling boosts external confidence
The Uganda Shilling strengthened for the fourth consecutive month, gaining 0.5 percent against the US Dollar and 0.6 percent against the Pound Sterling. “This appreciation is being driven by increased offshore investment, improved coffee export earnings, and confidence in Uganda’s macroeconomic policies,” the report highlighted. However, the Shilling slipped by 1.0 percent against the Euro during the same period.
Interest rates and credit trends
The Central Bank Rate [CBR] remained unchanged at 9.75 percent for the tenth consecutive month, underscoring the Bank of Uganda’s commitment to balancing inflation management with economic growth.
Commercial lending rates, however, edged higher. Shilling-denominated loans averaged 19.07 percent, up from 18.64 percent in May, while foreign currency lending rates rose to 8.78 percent. The report cited “increased risk perceptions in sectors such as telecommunications and real estate” as key factors behind the uptick.
Credit demand remains robust
Private sector credit continued its upward trajectory, growing by 7.5 percent year-on-year to Shs 23.9 trillion. This expansion was underpinned by improved business sentiment and a GDP growth rate of 6.3 percent for the financial year 2024/25.
“Much of the lending in June was directed towards personal and household consumption, trade, and agriculture,” the Ministry noted.
Government securities and fiscal operations
The Government raised Shs 2.69 trillion from domestic markets in July through the issuance of Treasury Bills and Bonds. “Investor appetite remained strong, resulting in oversubscription of Treasury auctions,” the report stated. Yields on the 91-day and 364-day bills fell to 11.6 percent and 15.3 percent respectively.
On the fiscal side, Uganda recorded a narrower-than-expected deficit of Shs 1.46 trillion, attributed to better revenue performance and restrained expenditure. Total revenue and grants amounted to Shs 2.54 trillion, surpassing projections, thanks to buoyant corporate tax collections and a Shs 168 billion disbursement from the World Bank to support the INVEST project.
Trade deficit widens despite export growth
Merchandise exports surged by 64.3 percent year-on-year to US$ 1.15 billion in June 2025. However, Uganda’s trade deficit widened to US$ 272.9 million, an 11.4 percent increase from June 2024 – as import volumes, particularly of oil, mineral products, and base metals, outpaced export growth.
Coffee exports continued to shine, with volumes rising by nearly 28 percent month-on-month, offsetting a modest dip in global prices. “The Middle East remained Uganda’s top export destination, with mineral and coffee shipments to the UAE driving volumes,” the Ministry stated.
Nonetheless, intra-regional trade performance was less favourable. Exports to the East African Community [EAC] declined by 4 percent in June, while imports from the region increased, leading to a US$ 209.5 million trade deficit with EAC partners. The Ministry attributed this to “non-compliance with regional trade protocols and the emergence of new trade barriers.”
Mixed fortunes across the region
Uganda’s inflation trajectory in July mirrored that of Rwanda, which also saw a decline to 7.2 percent. Conversely, Kenya and Tanzania either experienced marginal increases or stable inflation rates. Uganda, Kenya, and Tanzania all registered modest currency gains against the US Dollar, in contrast to continued depreciation in Burundi and Rwanda.
Cautious optimism prevails
MoFPED concluded that July’s economic indicators reflect “a cautiously optimistic outlook.” With inflation broadly under control, private sector dynamism, and strong fiscal discipline, Uganda appears well-positioned to navigate ongoing global and regional economic uncertainties.
However, it warned of emerging risks: “Widening trade imbalances, particularly within the EAC bloc, and rising borrowing costs remain key vulnerabilities that will require close monitoring in the coming months.”
Buy your copy of thecooperator magazine from one of our country-wide vending points or an e-copy on emag.thecooperator.news
