UGANDA’S COST OF LIVING CRISIS: CAUSES, RESPONSIBILITY AND POLICY RESPONSE!

By Karenzi Gerald Kooli, Former MP Candidate, Rujumbura County, Rukungiri District.

Introduction:

Uganda faces a cost of living crisis. The shilling has weakened, food and fuel prices have risen, transport fares have risen, and borrowing has become more expensive.

This report sets out the facts, the causes, responsibility, and the policy response required.

Key facts.

1. Exchange Rate: In March 2026, the dollar stood at Shs 3,604. By late October, it reached about Shs 4,500. In early November, it traded at Shs 4,089 to Shs 4,227.

Uganda imports fuel, wheat, cooking oil inputs, medicine, spare parts and phones. When the dollar rises, importers pay more shillings for the same dollar.

That cost is passed to the consumer.

2. Food Prices: Market Reality, UBOS averages understate what Ugandans pay. Both figures are given below.

Beans: UBOS average, Oct 2026 — Shs 5,411 per kg. Market price — Shs 6,000 to Shs 9,000 per kg.

Posho: UBOS average — Shs 2,846 per kg. Market price — 50kg bag at Shs 125,000 to Shs 150,000.*

Bread: Bakers raised a 1kg loaf from Shs 5,500 to Shs 6,500 in November. Market price in many shops — up to Shs 9,000. About 80% of bread cost is imported materials.

Cooking Oil: UBOS average — Shs 9,980 per litre. Market price — Shs 9,000 to Shs 10,000 in Kampala, higher upcountry.

A plate of posho and beans: In Kabale, a meal that was Shs 2,000 to Shs 3,000 now costs Shs 3,000 to Shs 5,000, up to Shs 6,000, with smaller portions.

3. Fuel and Transport: Petrol bow buys betwwen Shs 6,799 to Shs 7,260 per litre. Diesel is between Shs 7,040 to Shs 7,150 per litre.

Petrol is 30% to 34% more expensive than a year ago. Diesel is 42% to 49% more expensive. Bus fares have risen by at least 30% on many major routes.

This reduces household income for food and raises traders’ cost of bringing goods to the market.

4. Cost of Borrowing: Central Bank Rate was raised to 12%, up from 9.75% on 14th October 2026. The Prime Lending Rate is now 21.75% at Absa and Stanbic, 22% at dfcu. For best borrowers only.

Average weighted rate on existing loans is at 17.90% in August 2026 as per the Ministry of Finance records.

What most new borrowers pay:

21% to 29% per annum, after banks add a margin above prime. At 21% to 29%, businesses cannot expand, traders cannot stock, and farmers cannot invest.

Causes

(I). External shock. Conflict in the Middle East raised oil prices, shipping and insurance.

(ii) Dollar shortage. Dollar inflows fell as coffee and cocoa prices fell and tourism receipts fell. The current account deficit widened by USD 1.4 billion to USD 4.6 billion. As Finance Minister Henry Musasizi told Parliament on 27th October: “When demand for dollars exceeds supply, the price of the dollar rises.”

(iii). Capital outflows. Foreign investors sold government bonds and withdrew dollars. Dollar demand from the energy sector alone rose from USD 360 million to USD 620 million in three months to September.

(iv). Speculation and panic. Expectation of further depreciation led to dollar hoarding, accelerating the fall.

(v). Structural weakness. Uganda imports too much and adds too little value to exports. It exports raw coffee, not finished coffee; raw cocoa, not chocolate. It imports wheat, cooking oil and medicine.

Every dollar shock therefore becomes a food, fuel and school fees shock.

Analysts estimate 25% of the crisis is external, 75% is local vulnerability and panic.

Responsibility.

The world market triggered the fuel shock.

The government is responsible for high borrowing, high spending on non-essential travel and workshops, slow action to cut waste, slow export diversification, and slow progress on oil production, now expected only in the second half of 2026/27.

The Bank of Uganda acted slowly at first, then decisively on 14th October by raising the rate to 12%.Parliament and politicians created uncertainty.

The Bank itself warned that the Protection of Sovereignty Act 2026 could discourage investors.

Speculators worsened the fall. Citizens contributed through demand for imports and panic buying, although they remain victims of prices they did not set.

The problem began outside Uganda but was made worse inside Uganda.

What Government Must Do

(a). Restore fiscal discipline. Cut non-essential expenditure. Fiscal indiscipline undermines monetary policy.

(b). Reduce fuel taxes temporarily. This is the fastest way to ease transport and food prices, including bus fares up 30%.

(c). Increase production and value addition. Support farmers with seeds, storage and irrigation. Process coffee, cocoa and other exports in Uganda. End sudden export bans.

(d). Protect the vulnerable. 3.6 million Ugandans face high acute food insecurity, expected to rise to 4.4 million by early next year. Prioritise school feeding, targeted cash support and stocked health centres.

(e). Align monetary and fiscal policy.* If the Bank tightens while Finance borrows heavily, citizens pay twice — through high prices and high loan rates.

(f). Restore investor confidence. Speed up oil production, restore tourism confidence with clear information on Ebola, and keep laws predictable.

(g). Use reserves prudently. Reserves stood at USD 6.7 billion in June 2026. They exist for shocks — to calm panic, not to be exhausted.

Outlook

Short term, Nov-Dec 2026: Inflation is projected at 7% to 7.5% over the next 12 months, above the 5% target. Prices will remain high through Christmas.

Medium term, Jan-June 2027: Recovery will be slow if oil prices fall, coffee recovers and tourism returns. Growth has been revised down from 7% to 7.5% to 6% to 6.5%.

Long term, Traders rarely cut prices after a crisis. Without production, value addition and fiscal discipline, the next external shock will produce the same result.

Conclusion:

Stability on paper must reach the market.

A stable shilling means little if beans are Shs 6,000 to Shs 9,000, a bag of posho is Shs 125,000 to Shs 150,000, bread is up to Shs 9,000, bus fares are up 30%, and loans cost 21% to 29%.

The test for any leadership, including that of Mokili Mobimba, is simple: Will loan interest fall? Will food and transport stop rising? Will businesses obtain affordable credit? Will the government stop competing with citizens for loans? If yes, stability is real.

If not, stability benefits only banks and large importers, not the farmer in Rujumbura or the market woman in Rukungiri.

The cure is discipline from government, protection for the poor, and production by Ugandans.

Sources: Bank of Uganda (CBR 12%); UBOS, Oct 2026 (beans 5,411; maize flour 2,846; cooking oil 9,980); Ministry of Finance (average lending rate 17.90%, Aug 2026); Absa, Stanbic, dfcu notices (Prime 21.75%-22%); market prices as observed across Uganda — beans 6,000-9,000, posho 50kg 125,000-150,000, bread up to 9,000, bus fares +30%.