The shilling's slide and what it means for Ugandan coffee earnings: reading the central bank's explanation
By Sandra Nansbuga
The shilling's slide and what it means for Ugandan coffee earnings: reading the central bank's explanation
The Bank of Uganda has attributed the Uganda shilling's depreciation to the US-Iran conflict and to movements in the coffee market, both of which pull dollars away from the local currency. The two explanations pull an exporter's books in opposite directions.
The central bank's account was set out publicly by Deo Sunday of its Monetary Policy Department at a town hall meeting in Kabale on 25 September 2026, as reported by The Independent. He said dollar demand had increased, partly because the US-Iran war had led some investors to move savings into currencies they consider safer. He separately cited fluctuations in global coffee prices and adverse weather, which he said had contributed to a decline in coffee production and exports.
The Bank of Uganda's published data frame it more narrowly. Its August 2026 Monetary Policy Statement said exchange rate pressures had eased and the shilling had stabilised after depreciating earlier in the year. Its Monetary Policy Committee summary report put the shilling at an average of 3,709.51 per dollar in July 2026, 3.2 percent weaker year on year and 1.3 percent weaker quarter on quarter, attributing that to bearish sentiment after renewed US-Iran hostilities and to higher corporate dollar demand from oil, manufacturing and telecoms firms. The shilling still appreciated 0.2 percent month on month in July on inflows from mining, energy, farm exports and remittances.
The May 2026 statement was blunter, saying the conflict had contributed to about 5.4 percent of depreciation between February and April 2026.
On coffee, the Coffee Department of the Ministry of Agriculture, Animal Industry and Fisheries reported that Uganda shipped 846,376 bags in July 2026, down 14.9 percent in volume and 18.4 percent in value on July 2025. Over the twelve months to July 2026, exports reached 8.2 million bags worth US$2.13 billion, up 3.4 percent in quantity but down 4.8 percent in value. Robusta was 92 percent of July volumes, and Italy took 29.3 percent of them, Sudan 15.1 percent and Germany 10.7 percent.
| Uganda coffee exports | July 2025 | July 2026 |
|---|---|---|
| Volume (60-kg bags) | 995,071 | 846,376 |
| Value (US$) | 250.1 million | 204.1 million |
| Average export price (US$ per kg) | 4.20 | 4.00 |
What this means for buyers
A weaker shilling raises the shillings an exporter banks per dollar of a dollar-priced contract, cushioning local costs such as buying cherry, hulling, transport and finance. That cushion is largest when depreciation comes from external forces such as safe-haven dollar demand, and smallest when it comes from lower coffee earnings. The central bank named both, so the exchange rate alone says little about whether an exporter's margin is improving. Offers rest on a world price that has softened, while July farmgate prices ranged from 5,000 to 6,000 shillings per kilogram for kiboko to 14,500 to 15,500 shillings for Arabica parchment. Exporters therefore sit between a firm local buying market and a weaker export price, and will defend their differentials. Expect the coming crop's negotiations to turn on grade and screen, with the bank now describing the currency as stabilised.
FAQ
Q: Did the Bank of Uganda officially blame the Iran war for the shilling's slide?
A: In part. Its Monetary Policy Department cited increased dollar demand linked to the US-Iran war at a Kabale meeting on 25 September 2026, and its MPC summary report attributed July's depreciation mainly to renewed US-Iran hostilities and corporate dollar demand.
Q: Does a weaker shilling raise the dollar value of Uganda's coffee?
A: No. Export sales are priced in dollars, so the rate changes how many shillings an exporter banks, not the dollar revenue. Dollar earnings track world prices and volumes, and the average export price was US$4.00 per kilogram in July 2026 against US$4.20 a year earlier.
Q: Is the shilling still falling?
A: The Bank of Uganda's August 2026 statement said exchange rate pressures had eased. The shilling averaged 3,709.51 per dollar in July 2026, 3.2 percent weaker than a year earlier but 0.2 percent stronger than in June.
Sources: Monetary Policy | The Independent | August 2026 Monetary Policy Statement | May 2026 statement | Coffee Department of the Ministry of Agriculture, Animal Industry and Fisheries