The National Entrepreneurs and Traders Association (NETA) Uganda has called for urgent government action to protect traders, small and medium-sized enterprises (SMEs) and consumers from the effects of the weakening Uganda Shilling against the United States Dollar.
NETA Uganda President Dr Musoke Thadeus Naganda said the recent depreciation of the Shilling, which has crossed the psychologically important Shs4,000 per US dollar mark, is likely to increase the cost of doing business and put further pressure on household incomes.
The association said the weakening currency is being driven by several factors, including increased demand for foreign currency by importers and manufacturers, energy-related businesses, corporate foreign-currency obligations, international economic and geopolitical developments, and increased import demand.
Although Uganda operates a flexible exchange-rate regime where the value of the Shilling is largely determined by market forces, NETA Uganda said excessive volatility makes it difficult for businesses to plan and could increase the cost of goods and services.
“When the Shilling weakens against the dollar, importers require more Shillings to purchase the same amount of goods, while manufacturers pay more for imported machinery, raw materials and other inputs,” the association said.
NETA Uganda added that traders also face higher wholesale and stock-replacement costs, while businesses with dollar-denominated obligations have to spend more to meet their repayments.
The association said the effects are eventually passed on to consumers through higher prices for goods and services.
Fuel prices are also likely to come under pressure because petroleum products are internationally priced in dollars, potentially increasing transportation and distribution costs across the economy.
NETA Uganda expressed particular concern about SMEs, which it said often operate on relatively narrow profit margins.
According to the association, when the cost of replacing stock rises unexpectedly, traders are left with three difficult choices: increase prices, reduce their profit margins or reduce the volume of goods they stock.
It said all three options can negatively affect business activity.
A trader who bought stock at an earlier exchange rate may find that replacing the same stock is significantly more expensive. Increasing the selling price could reduce demand, while maintaining the old price could result in losses.
NETA Uganda said this makes exchange-rate stability a business-survival issue for many SMEs.
The association has called on the Bank of Uganda to closely monitor foreign-exchange market conditions and take appropriate measures to contain excessive volatility.
It also wants the central bank to strengthen communication with banks, forex bureaux and the business community, provide timely information on major movements in the foreign-exchange market and maintain engagement with business associations representing traders and SMEs.
NETA Uganda, however, said it does not support defending an artificial exchange-rate level, noting that market forces should continue to determine the value of the currency while authorities intervene where necessary to address excessive volatility.
The association also called on the Ministry of Finance, Planning and Economic Development to strengthen measures aimed at increasing Uganda’s export earnings, supporting value addition and local manufacturing and reducing unnecessary dependence on imported products.
It further urged the government to provide greater support to SMEs involved in production and exports and to regularly consult private-sector associations on exchange-rate pressures.
Commercial banks and other financial institutions, NETA Uganda said, should improve access to affordable trade finance, provide predictable foreign-exchange services to legitimate importers and exporters, expand financing for productive SMEs and improve transparency in foreign-exchange pricing and related charges.
The association also wants financial institutions to develop products that can help businesses manage legitimate foreign-currency risks.
For the long term, NETA Uganda said Uganda must address the structural weaknesses that contribute to foreign-exchange pressures rather than relying solely on short-term interventions.
It called for increased production and exports, greater local value addition, stronger domestic manufacturing, improved support for farmers, manufacturers, processors and SMEs, and the development of tourism, ICT and professional services as sources of foreign currency.
The association also urged traders not to engage in panic buying or unnecessary dollar hoarding.
It advised businesses to carefully review their import requirements, improve stock and cash-flow management, negotiate favourable payment terms with suppliers, compare legitimate foreign-exchange rates and avoid speculative currency purchases.
NETA Uganda also encouraged businesses to consider local suppliers where quality and pricing are competitive and to maintain accurate financial records while regularly reviewing operating costs.
The association has proposed an urgent Government–Private Sector Foreign Exchange and Business Stability Dialogue involving the Bank of Uganda, Ministry of Finance, Ministry of Trade, Industry and Cooperatives, commercial banks, manufacturers, importers and exporters, traders, SMEs and business associations.
The proposed dialogue would seek practical measures to improve foreign-exchange liquidity, strengthen exports, protect productive businesses and reduce unnecessary pressure on consumers.
NETA Uganda said its position is not for an artificially fixed exchange rate but for a stable, transparent and predictable business environment where traders and entrepreneurs can plan, invest, create jobs and expand their businesses.
Dr Naganda said Uganda’s strongest long-term defence against currency pressure is increased production, stronger exports, value addition, productive investment and reduced unnecessary dependence on imports.
The association called on government and other economic stakeholders to treat the current movement of the Shilling as an issue requiring urgent attention, while cautioning against panic.
“A stronger economy produces more. A productive economy exports more. An exporting economy earns more foreign currency,” NETA Uganda said.
The association said it stands ready to work with government, the Bank of Uganda, financial institutions and the private sector to develop measures aimed at protecting traders, creating jobs and promoting sustainable economic growth.
