Uganda’s Financial system in June 2025, Development Amid Rising Costs

By David Mwanje

Uganda’s economy is showing strength but faces challenges as prices for everyday goods like matooke and beans creep up, according to the June 2025 “Performance of the Economy” report from the Ministry of Finance. For local traders and ordinary Ugandans, this report highlights opportunities and hurdles in a growing economy. With a 6.3% GDP growth for the 2024/25 financial year, Uganda is moving forward, but rising costs and a budget shortfall could affect markets, shops, and households across the country.

Inflation, the rate at which prices increase, rose slightly to 3.9% in June from 3.8% in May. This means goods like matooke (up 37.7% from last year), dry beans (12.1%), and passion fruits (5.3%) are getting pricier. For traders in markets like Nakasero or Kalerwe, this could mean higher costs for stock, squeezing profits unless they raise prices. For families, especially in Kampala or Gulu, this makes budgeting tougher as food takes a bigger chunk of income. However, the report notes that inflation averaged 3.5% for the year, below the government’s 5% target, thanks to good harvests and careful policies. This stability helps traders plan better, knowing prices won’t skyrocket suddenly.

Economic activity is picking up, which is good news for businesses. The Composite Index of Economic Activity (CIEA) grew by 0.3% to 178.58 in May, driven by strong trade and government spending. For local traders in Jinja or Mbale, this means more goods are moving, from exports like coffee to imports like machinery. The Purchasing Managers’ Index (PMI) hit 55.6 in June, showing private businesses are thriving due to more orders and output. However, higher costs for materials and workers slightly slowed this growth. The Business Tendency Index (BTI) at 59.17 reflects optimism, especially in manufacturing and construction, signaling that traders in these sectors might see more demand soon.

The Ugandan Shilling strengthened by 1.3% against the US Dollar, trading at UShs 3,605.84 in June. For importers in Mbarara or Arua, a stronger shilling makes foreign goods like electronics or fuel cheaper, potentially boosting sales. The Central Bank kept its rate at 9.75%, balancing growth and price control. Loans to businesses jumped, with UShs 2,311.19 billion given out in May, up 49.4% from April. Transport and communication businesses got 30.6% of these loans, while personal loans took 21.2%. This is great for small business owners in Soroti or Lira looking to expand, but they should note that loan interest rates rose to 18.64% for shilling loans, making borrowing costlier.

Exports soared by 36.8% to USD 1,198.86 million in May, led by coffee (up 91.6% to USD 243.95 million) and cocoa (tripling to USD 108.58 million). For coffee farmers in Buganda or Busoga, this means better earnings, especially with higher global prices. However, imports grew by 30.1% to USD 1,309.71 million, widening the trade gap slightly. The Middle East and EAC are key markets, with Uganda exporting heavily to the UAE and importing from Tanzania. Local traders can tap these markets but face competition from cheaper imports.

The government ran a UShs 44.49 billion deficit in June, despite strong tax collections, due to higher spending on roads and hospitals. For traders, this could mean better infrastructure but also higher taxes later. In the EAC, Uganda’s trade deficit with neighbors like Kenya narrowed, offering opportunities for cross-border traders in Katuna or Busia. Overall, Uganda’s economy is growing, but traders and households must navigate rising prices and plan wisely to seize opportunities in this dynamic market.

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