Uganda’s Treasury halves ministries’ fuel money as the shilling weakens past 4,000 to the dollar

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Uganda’s Ministry of Finance has cut the money it releases to government ministries for fuel, workshops and travel in the October to December quarter, as the government tries to cool demand while the shilling trades at its weakest nominal level against the US dollar.

Ramathan Ggoobi, the Secretary to the Treasury, gave an example of how deep the cut runs in a radio interview on Kampala’s KFM, a clip of which the ministry shared on X on Sunday as its “key message on economy”.

“If you have a budget of fuel, you had a budget of fuel of five million shillings in a month, now we have released two-and-a-half million. Reduce the trips,” Mr Ggoobi said. He told officials to attend workshops online rather than travel to them, adding: “You don’t need to drive there.”

He said the spending squeeze was the government’s answer to the Bank of Uganda’s signal on interest rates. “The first major signal of a central bank is to tell you tighten right now. And they are not telling banks, they are telling every economic agent,” he said.

Growth sectors spared

Mr Ggoobi said the Treasury had shielded the parts of the budget it sees as growth drivers. “We protected the growth drivers. We released the budget of agriculture. We released the budget of tourism,” he said, adding that money for the ministry that supports industrialists and for science, technology and innovation had also gone out “so that those things continue unaffected because you need them to spend and create more growth.”

The ministry’s press release on second-quarter releases, dated October 15, puts the total Q2 release at Shs21.82 trillion, about 26 percent of the approved annual budget. Of that, Shs10.75 trillion goes to debt and treasury operations and Shs2.42 trillion to public wages. Science, technology and innovation gets Shs372.9 billion, agro-industrialisation Shs224.5 billion, tourism Shs48.2 billion and the Uganda National Oil Company and the Petroleum Authority of Uganda Shs46.7 billion.

One of the release’s guiding principles is “containing non-essential expenditure while protecting priority programmes, critical services and strategic investments.” It also says state-funded celebrations on public holidays have been eliminated, except for religious holidays.

A record low for the shilling

The Treasury’s statement says the shilling has depreciated by 6 percent against the dollar since the start of August, after gaining 1.9 percent in the 2025/26 financial year. “While the Shilling has recently weakened beyond Shs 4,000 against the US dollar, its lowest nominal level on record,” the release says, the Bank of Uganda’s historical analysis shows the country has gone through sharper bouts of depreciation before.

It blames dollar demand from the energy, manufacturing and telecommunications sectors, which it says has outstripped inflows from exports, remittances and foreign direct investment. Uganda’s import bill for July and August reached US$3.94 billion, up 44.8 percent on a year earlier, against goods exports of US$2.89 billion, widening the merchandise trade deficit to US$1.04 billion from US$383.07 million.

The Bank of Uganda raised its Central Bank Rate by 225 basis points to 12.0 percent at a special meeting on October 14, after lifting the cash reserve requirement for banks to 13.5 percent from 11 percent in September. Its monetary policy committee said headline inflation rose to 4.6 percent in September from 4.1 percent in August, and now projects headline inflation of 7.0 to 7.5 percent over the next 12 months.

The central bank cut its growth forecast for FY2026/27 to 6.0 to 6.5 percent from 7.0 to 7.5 percent, citing tighter financial conditions, the weaker shilling and high global energy prices. The Treasury’s own October 15 statement still projects 7.6 percent growth for the year.

A weaker Ugandan shilling means Kenyan goods cost more in shilling terms for buyers in Uganda. Kenya has faced the same oil price shock; the IMF found that Kenya passed 62 percent of the diesel price rise on to motorists. In Uganda’s private sector, MTN Uganda has just started selling Starlink internet to businesses in remote areas.