February 2026
Performance of the Economy Report
Ministry of Finance, Planning and Economic Development
2026-03-24
List of Acronyms
| Acronym | Expansion | |
|---|---|---|
| B.Franc | Burundian Franc | |
| BOU | Bank of Uganda | |
| BTI | Business Tendency Index | |
| CBR | Central Bank Rate | |
| CIEA | Composite Index of Economic Activity | |
| D.R.C | Democratic Republic of Congo | |
| EAC | East African Community | |
| EFU | Energy, Fuel and Utilities | |
| FOB | Free on Board | |
| FX | Foreign Exchange | |
| FY | Financial Year | |
| GBP | British Pound Sterling | |
| ICBT | Informal Cross Border Trade | |
| KShs | Kenyan Shilling | |
| MDAs | Ministries, Departments and Agencies | |
| MOFPED | Ministry of Finance, Planning and Economic Development | |
| NGOs | Non-Governmental Organisations | |
| PAYE | Pay as You Earn | |
| PMI | Purchasing Managers’ Index | |
| PSC | Private Sector Credit | |
| R.Franc | Rwandan Franc | |
| T-Bills | Treasury Bills | |
| T-Bonds | Treasury Bonds | |
| TzShs | Tanzanian Shilling | |
| UBOS | Uganda Bureau of Statistics | |
| UShs / Shs | Ugandan Shilling | |
| US$ / USD | United States Dollar | |
| VAT | Value Added Tax | |
| YTM | Yield to Maturity |
Summary1
Real Sector
According to the Uganda Bureau of Statistics, preliminary estimates show that the economy expanded by 8.5 percent in the second quarter of FY 2025/26, up from 5.4 percent recorded in the same quarter of FY 2024/25. This was largely due to increased aggregate demand and investments in ICT equipment, buildings and other structures, other machinery & equipments.
Economic activity during the month of February 2026 continued to improve, characterized by improvements in business conditions, partly due to higher output and increased employment. The high frequency indicators of economic activity and business sentiments, that is the Purchasing Managers’ Index (PMI) and the Business Tendency Index (BTI) remained above the 50-mark threshold, indicating improvements in economic activity and the outlook respectively.
The Purchasing Managers’ Index (PMI) was recorded at 54.2 in February 2026 indicating further improvement in business conditions due to increased consumer demand, which led to higher output and employment levels. Additionally, the Composite Index of Economic Activity (CIEA) rose to 183.90 in January 2026 from 182.36 in December 2025 indicating increased economic activity.
The Business Tendency Index (BTI) was recorded at 58.70 in February 2026, reflecting higher optimism about business conditions in the economy. The higher optimism was mainly reported in agriculture, manufacturing, financial services, wholesale trade, and other services sectors.
Annual headline inflation declined to 2.9 percent in February 2026 from 3.2 percent in January 2026. The decline in headline inflation was partly attributed to a slowdown in the rate at which the prices of services increased particularly air transport services for international flights, as well as health service costs including consultation fees, hospitalization charges and blood test fees among others. Additionally, the fall in inflation was supported by reduced prices of food items such as fresh vegetables, mangoes, beans, pumpkins, and cowpeas, largely reflecting an increase in food supply during the harvest season. This marks the lowest inflation rate recorded since the start of FY 2025/26.
Financial Sector
In February 2026, the Ugandan Shilling depreciated by 0.2 percent against the US Dollar, trading at an average mid-rate of Shs. 3,568.23/USD, compared to Shs 3,562.14/USD in January 2026. This was attributed to seasonal corporate demand for the US dollar, and an increase in oil prices.
The Central Bank Rate (CBR) remained unchanged at 9.75 percent in February 2026, marking the seventeenth consecutive month at this level. This rate was considered appropriate to support economic activity, while ensuring that inflation stabilizes at the policy target rate of 5 percent over the medium to long-term.
The weighted average lending rate for the Shilling-denominated credit increased from 18.0 percent in December 2025 to 18.33 percent in January 2026. In contrast, the weighted average lending rate for foreign-currency-denominated credit decreased from 7.32 percent to 7.21 percent over the same period.
In February 2026, Government raised Shs. 1,613.17 billion from two Treasury Bill (T-Bill) auctions and one Treasury Bond (T-Bond) auction. Shs. 615.98 billion was raised from T-Bills while Shs. 997.19 billion was raised from T-Bonds.
Annualized yields (interest rates) on Treasury Bills continued on a downward trend across all tenors in February 2026. Yields on the 91-day, 182-day and 364-day tenors reduced to 11.0 percent, 11.9 percent and 12.3 percent in the month under review, from 11.2 percent, 12.7 percent and 14.0 percent respectively in January 2026. All auctions for Treasury Bills remained oversubscribed, with an average bid to cover ratio of 2.16 during the month under review, indicating strong market demand.
Similarly, yields on Treasury Bonds declined in February 2026 in comparison to the rates registered in previous issuances of similar securities. In particular, yields for the 3-Year, 10-Year and 20-Year tenor bonds reduced to 13.30 percent, 14.50 percent and 15.49 percent from 15.90 percent, 16.75 percent and 17.63 percent respectively.
Private sector credit grew by 0.3 percent in January 2026, which was lower than the 1.3 percent growth in December 2025, reflecting a drop in demand for credit following the festive season. On a year-on-year basis, growth in private sector credit was unchanged at 0.3 percent in January 2025, generally reflecting slow growth of credit at the start of the year.
External Sector2
In January 2026, Uganda recorded a merchandise trade surplus of USD 147.26 million. Uganda’s merchandise trade balance improved on a month-on-month basis from a deficit of USD 206.43 million to a surplus of USD 147.26 million and year-on-year from a deficit worth USD 215.28 million to a surplus of USD 147.26 million.
Merchandise export receipts rose substantially on a year on year basis (72.1 percent), rising from USD 844.60 million in January 2025 to USD 1,453.53 million in January 2026 due to higher export earnings from gold, coffee, industrial products, oil re-exports, beans, and electricity, among others.
The merchandise import bill year on year, grew by 23.2 percent, rising from USD 1,059.88 million in January 2025 to USD 1,306.27 million in January 2026. This increase was primarily attributed to higher formal private sector imports such as mineral products (excluding petroleum products), machinery equipment, vehicles & accessories, among others.
Fiscal Sector3
Government operations during February 2026 resulted in a fiscal deficit of Shs. 1,221.53 billion, which was higher than the programmed target of Shs. 985.85 billion. The higher than targeted deficit was mainly driven by expenditure that exceeded projections, due to supplementaries for infrastructure development and a part payment for the purchase of new aircrafts for Uganda Airlines.
Domestic revenues amounted to Shs. 2,613.31 billion against the target of Shs. 2,881.94 billion translating into a performance rate of 90.7 percent and a shortfall of Shs. 268.63 billion. The underperformance was mainly driven by shortfalls in non-tax revenue.
In February 2026, total expenses amounted to Shs. 3,390.15 billion, slightly below the planned Shs. 3,424.73 billion. However, expenses in certain areas exceeded expectations for the month, particularly interest payments and grants, which were higher than initially projected.
Inflation trends across EAC Partner States were mixed in February 2026. In Kenya and Tanzania, Annual headline inflation declined to 4.3 percent and 3.2 percent, from 4.4 percent and 3.3 percent in January 2026, respectively. Contrarily, inflation in Rwanda rose further to 7.9 percent in February 2026 from 7.5 percent in January 2026 largely reflecting higher prices in key categories such as housing & utilities, restaurants & hotels, alcoholic beverages and transport.
Aside from Kenya, local currencies within the EAC Partner States recorded losses against the US dollar in February 2026. The Tanzanian shilling recorded the largest depreciation of 3.6 percent in February 2026, mainly due to reduced foreign exchange earnings from key sectors such as agriculture, mining, and tourism, which typically experience seasonal slowdowns. At the same time, higher demand for the US dollar by importers especially ahead of the Chinese New Year exerted pressure on the currency. The Ugandan Shilling, Burundian Franc, and Rwandan Franc depreciated by 0.2 percent, while the Kenyan Shilling remained unchanged in February 2026.
In January 2026, Uganda traded at a surplus with the EAC worth USD 41.52 million, an improvement when compared with the deficit of USD 3.61 million recorded in January 2025. This improvement was largely attributed to an increase in exports, coupled with a decrease in imports. At a country specific level, surpluses were recorded with the Democratic Republic of Congo, South Sudan, Rwanda and Burundi while deficits were recorded with Tanzania and Kenya.
1 Real Sector Developments
1.1 Economic Growth
According to the Uganda Bureau of Statistics, preliminary estimates show that the economy expanded by 8.5 percent in the second quarter of FY 2025/26, up from 5.4 percent recorded in the same quarter of FY 2024/25.
This strong performance was primarily driven by increased production in agriculture, forestry and fishing which grew by 8.8 percent, compared to 7.8 percent in the same period last financial year; the industry sector which grew by 12.3 percent, up from 7.7 percent; and services which grew by 6.2 percent, a notable increase from 2.2 percent in the previous period.
Growth was supported by robust aggregate demand and investment, which increased by 17.4 percent and 15.6 percent, respectively, relative to the same period in the previous financial year. Additionally, improved performance in exports, tourism, and oil and gas activities contributed positively to overall economic growth.
1.2 Inflation
Annual headline inflation declined to 2.9 percent in February 2026 from 3.2 percent in January 2026, mainly on account of a reduction in both Annual Core Inflation and Annual Food Crops and Related Items Inflation. This marks the lowest inflation rate recorded since the start of FY 2025/26.
Annual core inflation declined to 3.0 percent in February 2026 from 3.3 percent the previous month. The decline was partly attributed to a slowdown in the rate at which the prices of services increased particularly air transport services for international flights, as well as health service costs including consultation fees, hospitalization charges and blood test fees among others.
Similarly, Annual food crop and related items inflation declined to 1.8 percent in February 2026 from 3.0 percent in January 2026, on account of increased supply of major food items during the harvest season. This was reflected in the reduction of the prices of the following food items; mangoes, tomatoes, pumpkins, fresh okra, matooke, beans, cowpeas, dried cassava, and fresh vegetables.
In addition, there was also a slowdown in the rate at which prices increased for avocado (20.0 percent in February 2026 compared to 26.4 percent in January 2026), passion fruits (7.7 percent compared to 11.2 percent), apples (3.4 percent compared to 7.7 percent), milk (3.7 percent compared to 5.0 percent), green pepper (12.7 percent compared to 33.7 percent) and sweet potatoes (2.6 percent compared to 4.0 percent).
In contrast, Annual Energy, Fuels and Utilities (EFU) inflation increased to 2.7 percent in February 2026 from 1.7 percent in January 2026. This was mainly on account of an increase in prices of liquid and solid fuels. Prices of diesel and petrol increased by 0.8 percent and 3.4 percent in February 2026 compared to -0.7 percent and 1.3 percent in January 2026, respectively. This was partly on account of logistical disruptions along key supply routes, that led to rerouting and thus increased transport costs. Additionally, prices of firewood and charcoal increased by 10.3 percent and 6.0 percent in February 2026 compared to 6.9 percent and 4.6 percent in January 2026, mainly on account of intensified surveillance along roads used to transport solid fuels such as charcoal to urban areas, in a bid to adhere to the 2023 ban on charcoal production.
1.3 Economic Activity
Overall, the high frequency indicators of economic activity continued to show improvements in the level of economic activity and health of the private sector in February 2026. This was reflected mainly by the positive movements in the Purchasing Managers’ Index.
The Purchasing Manager’s Index (PMI) improved in February 2026 rising to 54.2 from 52.6 in January 2026 reflecting an improvement in business conditions across the Ugandan private sector. The good performance was explained by higher output, new orders, job creation, and inventory buildup, supported by stronger demand across the majority of sectors. Firms continued to hire (both temporary and full-time staff) driven by increased workloads across all the monitored sectors. Nevertheless, input costs continued to rise during the month, driven by higher wages and utility bills.
The Composite Index of Economic Activity (CIEA)6 improved for the fifth consecutive month rising to 183.90 in January 2026 from 182.36 in December 2025 indicating continued improvement in economic activity in the Ugandan economy.
1.3.1 Business Perceptions
Similarly, the Business Tendency Index (BTI) also improved in February 2026, rising to 58.70 up from 55.60 in January 2026 indicating higher optimism about business conditions in the economy. At sectoral level, higher optimism was reported in agriculture, manufacturing, financial services, wholesale trade, and other services sectors. Notwithstanding, perceptions of the players in the construction sector were pessimistic as respondents expressed lower optimism regarding some key indicators in the sector such as the present business situation and order volumes with suppliers.
2 Financial Sector Developments
2.1 Exchange Rate Movements
In February 2026, the Uganda shilling depreciated slightly against the US dollar by 0.2 percent, trading at an average mid-rate of Shs. 3,568.23/USD, compared to Shs. 3,562.14/USD in January 2026. Similarly, the Shilling weakened against the British Pound Sterling (by 0.5 percent) and the Euro (by 0.8 percent), trading at an average mid-rate of Shs. 4,844.81/GBP and Shs. 4,218.45/Euro from Shs. 4,818.52/GBP and Shs. 4,185.45/Euro respectively over the same period.
The weakening of the Ugandan Shilling was mainly on account of seasonal corporate demand for the US dollar, the Pound and the Euro, as well as an increase in oil prices. Additionally, there was an increase in demand for these currencies from energy and manufacturing sectors.
2.2 Interest Rate Movements
Overall, lending rates for Shilling denominated credit edged upwards in January 2026 compared to the previous month partly on account of the higher risk associated with new borrowers, particularly in the agriculture sector. This prompted commercial banks to charge slightly higher interest rates.
Yields (interest rates) on Treasury bills and bonds declined in the month of February 2026 driven by relatively high demand for Government securities due to reduced political risk after the elections, and continued offshore participation in the securities market.
The Monetary Policy Committee (MPC) maintained the Central Bank Rate (CBR) at 9.75 percent in February 2026. The Committee assessed that this rate remains appropriate to support economic activity while ensuring that inflation stabilizes around the 5 percent policy target over the medium to long term. Additionally, the Central Bank increased the Cash Reserve Requirement for commercial banks from 9.5 percent to 11.0 percent, in a bid to manage liquidity in the economy.
2.2.1 Lending Rates7
In January 2026, the average weighted lending rate for Shilling denominated credit increased to 18.33 percent, from 18.00 percent in December 2025. The rise in the lending rate for Shilling denominated credit was partly on account of the higher risk associated with new borrowers, particularly in the agriculture sector, which prompted commercial banks to charge slightly higher interest rates. On the other hand, the weighted average lending rate on foreign currency denominated credit slightly declined to 7.21 percent in January 2026 from 7.32 percent in December 2025.
2.3 Government Securities
In February 2026, Government raised Shs. 1,613.17 billion from two Treasury Bill (T-Bill) auctions and one Treasury Bond (T-Bond) auction. Of the total amount, Shs. 615.98 billion was raised from T-Bills while Shs. 997.19 billion was raised from T-Bonds. A total of Shs. 853.19 billion was used for financing items in the budget while a total of Shs. 759.98 billion was used for refinancing maturing securities.
| Total Issuances | Financing other items in the Government budget | Refinancing | |
|---|---|---|---|
| Q2 2025/26 | 7,220.1 | 5,457.4 | 1,762.7 |
| February 2026 | 1,613.2 | 853.2 | 760 |
| FY 2025/26 to date | 17,939.7 | 11,744.1 | 6,195.6 |
2.4 Annualized Yields (Interest Rates) on Treasury Bills
Just like previous month (January), yields (interest rates) declined for the second consecutive month across all tenors in February 2026. Yields on the 91-day, 182-day and 364-day tenors reduced to 11.0 percent, 11.9 percent and 12.3 percent in February 2026 from 11.2 percent, 12.7 percent and 14.0 percent respectively in January 2026.
All auctions for Treasury bills remained oversubscribed, with an average bid to cover ratio recorded at 2.16 in February 2026.
2.5 Annualised Yields (Interest Rates) on Treasury Bonds
In February 2026, Government held auctions for the 3-year, 10-year and 20-year bond tenors on the primary securities market. Similar to the T-Bills, yields (interest rates) on Treasury Bonds also declined in February 2026 in comparison to the rates registered in previous issuances of similar securities.
Yields for the 3-Year, 10-Year and 20-Year tenor bonds reduced to 13.30 percent, 14.50 percent and 15.49 percent down from 15.90 percent, 16.75 percent and 17.63 percent respectively.
The continued decline in yields for both T-Bills and T-Bonds was mainly driven by relatively high demand for Government securities (as shown by the bid to cover ratio) due to reduced political risk after the elections, and continued offshore participation in the securities market.
2.6 Outstanding Private Sector Credit8
The stock of outstanding private sector credit rose by 0.3 percent to Shs. 25,427.94 billion in January 2026, up from Shs. 25,346.70 billion in December 2025. The growth in January 2026 was mainly driven by Shilling-denominated credit which grew from Shs. 17,705.41 billion in December 2025 to Shs. 17,818.97 billion in January 2026. However, the 0.3 percent growth in January 2026 was slower than the 1.3 percent growth registered in December 2025, reflecting a drop in demand for credit following the festive season. On a year-on-year basis, growth in private sector credit was unchanged at 0.3 percent, generally reflecting slow growth of credit at the start of the year.
Foreign-currency denominated credit declined in January 2026 to Shs. 7,608.97 billion from Shs. 7,641.29 billion in December 2025 mainly on account of a reduction in foreign currency deposits.
2.7 Credit Extensions9
In January 2026, credit approved for disbursement amounted to Shs. 1,113.45 billion out of total loan applications valued at Shs. 2,837.11 billion, translating into an approval rate of 39.2 percent. This was significantly lower than the 73.0 percent approval rate registered in December 2025, partly due to reduced lending to sectors such as Trade, Manufacturing and Agriculture, as banks became more cautious about extending credit for contracts and projects in relatively riskier sectors during the election period.
Despite the decline, the Personal and Household Loans sector continued to account for the largest share of approved credit in January 2026, receiving 41.4 percent of the total, up from 23.8 percent received in December 2025. This was followed by Building, Construction and Real Estate (15.2 percent), Trade (13.2 percent), Business, Community, Social and Other Services (11.0 percent), and Agriculture (9.0 percent).
3 External Sector Developments
3.1 Merchandise Trade Balance10
In January 2026, Uganda recorded a merchandise trade surplus of USD 147.26 million. The improvement was largely driven by strong export performance, particularly from gold and coffee, which together generated USD 1,074.95 million in export earnings during the month.
As a result, Uganda’s merchandise trade balance improved on both a month-on-month and year-on-year basis. On a month-on-month basis, the trade balance shifted from a deficit of USD 206.43 million in December 2025 to a surplus of USD 147.26 million in January 2026. Similarly, on a year-on-year basis, the trade balance improved from a deficit of USD 215.28 million in January 2025 to a surplus of USD 147.26 million in January 2026. This surplus was achieved because the increase in the import bill was more than offset by the increase in export earnings.
3.2 Merchandise Exports
A year-on-year analysis shows that Uganda’s merchandise exports increased by 72.1 percent, rising from USD 844.60 million in January 2025 to USD 1,453.53 million in January 2026. This strong growth was primarily driven by higher export earnings from gold, coffee, industrial products, oil re-exports, beans, and electricity, among others.
Export earnings from gold recorded the most significant growth, increasing by 182.2 percent over the period, from USD 323.84 million in January 2025 to USD 913.95 million in January 2026. This increase was driven by both higher export volumes and rising global prices. The quantity of gold exported rose from 3,873 kilograms to 6,254 kilograms, while the average price increased from approximately USD 80,000 per kilogram in January 2025 to over USD 140,000 per kilogram in January 2026. Similarly, gold exports rose from USD 832.68 million in December 2025 to USD 913.95 million in January 2026 on account of an increase in the price of gold.
The rise in gold prices has been partly attributed to the weakening of the US dollar amid rising geopolitical tensions, which has prompted investors to seek gold as a safe-haven asset. In addition, many central banks have increased their gold reserves as part of efforts to diversify away from traditional reserve currencies such as the US dollar.
Year-on-year, Uganda’s export earnings from coffee increased marginally, rising from USD 156.50 million in January 2025 to USD 161.00 million in January 2026. This increase was largely driven by higher export volumes, which rose from 558,382 sixty-kilogram bags to 569,454 sixty-kilogram bags, because of increased coffee production. On a month-on-month basis, coffee export earnings also increased, rising from USD 149.87 million in December 2025 to USD 161.00 million in January 2026, primarily due to the increase in export volumes. The rise in volumes more than offset the decline in global coffee prices, resulting in an overall increase in export earnings. The decline in international coffee prices has largely been attributed to an improved global supply outlook, following favorable weather in key coffee-growing regions in Brazil, which boosted expectations of higher global production. Italy, Germany and Sudan were the major destinations of our coffee exports in January 2026.
Uganda’s merchandise trade balance significantly benefited from rising global prices for coffee and gold over the past year. In January 2026, these two commodities accounted for over 74 percent of total export earnings, highlighting their dominant role in the Uganda’s export performance. This concentration underscores the need for Uganda to add value to its exports and diversify its export base to higher value commodities. Greater diversification would help reduce the country’s vulnerability to price fluctuations in international commodity markets and support the sustainability of the recently achieved merchandise trade surplus.
| Product | Jan-2025 | Dec-2025 | Jan-2026 |
Jan-2026 vs Jan-2025 % Change |
Jan-2026 vs Dec-2025 % Change |
|---|---|---|---|---|---|
| Total Exports | 844.601 | 1,395.07 | 1,453.53 | 72.097 | 4.19 |
| Coffee | |||||
| Value Exported | 156.499 | 149.865 | 160.999 | 2.875 | 7.429 |
| Volume Exported (Millions of 60 Kg Bags) | 0.55 | 0.503 | 0.566 | 2.896 | 12.674 |
| Average Unit Value (US$ per Kg of Coffee) | 4.739 | 4.97 | 4.739 | -0.02 | -4.655 |
| Non-Coffee Formal Exports | 642.717 | 1,170.43 | 1,218.633 | 89.606 | 4.118 |
| of which: | |||||
| Mineral Products | 323.843 | 823.681 | 913.948 | 182.219 | 10.959 |
| Cotton | 1.321 | 0.681 | 0.762 | -42.316 | 11.912 |
| Tea | 5.75 | 4.415 | 4.723 | -17.874 | 6.969 |
| Tobacco | 9.493 | 10.435 | 7.143 | -24.749 | -31.546 |
| Fish & Its Prod. (Excl. Regional) | 13.644 | 16.633 | 13.091 | -4.051 | -21.294 |
| Simsim | 5.978 | 0.728 | 1.678 | -71.922 | 130.403 |
| Maize | 9.005 | 5.186 | 7.908 | -12.184 | 52.475 |
| Beans | 2.615 | 11.109 | 9.219 | 252.568 | -17.008 |
| Flowers | 5.439 | 5.526 | 6.761 | 24.312 | 22.349 |
| ICBT Exports | 45.385 | 74.775 | 73.898 | 62.825 | -1.173 |
3.3 Destination of Exports11
In January 2026, the Middle East remained Uganda’s leading export destination, accounting for 48.9 percent of Uganda’s exports. At a country specific level, the United Arab Emirates dominated, receiving 99.0 percent of our exports to the region. Other key export destinations included Asia (18.43 percent), the East African Community (17.92 percent) and the European Union (10.45 percent). Uganda’s merchandise exports to Asia amounted to USD 267.83 million, slightly surpassing exports to the East African Community, which totaled USD 260.43 million. Within Asia, the main destinations were Hong Kong, Malaysia, China, India, and South Korea. Key exports to the region comprised mineral products, coffee, and spices, among others.
3.4 Merchandise Imports12
In comparison with the same month the previous year, Uganda’s merchandise imports grew by 23.2 percent, rising from USD 1,059.88 million in January 2025 to USD 1,306.27 million in January 2026. This increase was primarily attributed to higher formal private sector imports, which more than offset the decline in Government imports. The key private sector imports include mineral products (excluding petroleum products), machinery equipments, vehicles & accessories, base metals & their products, petroleum products and animal & animal products, among others.
Conversely, a month-on-month analysis shows that merchandise imports declined by 18.5 percent, falling from USD 1,574.94 million in December 2025 to USD 1,283.73 million in January 2026, due to a fall in formal private sector non-oil related imports and Government imports. Some of these imports include mineral products, vegetable products, animal, beverages, fats & oils, base metals & their products, prepared foodstuff, beverages & tobacco, among others.
3.5 Origin of Imports
In January 2026, Asia remained Uganda’s major source of imports, accounting for 33.9 percent of the total import bill. Within Asia, China, India and Japan were the dominant sources of our imports, accounting for 52.4 percent, 22.3 percent and 8.6 percent of our imports, respectively. Other notable sources of our imports were the Rest of Africa, the East African Community and the Middle East, accounting for 29.1 percent, 16.8 percent and 11.5 percent, respectively.
3.6 Trade Balance by Region
In January 2026, Uganda recorded trade surpluses with the Middle East, the European Union and the East African Community amounting to USD 559.90 million, USD 77.23 million and USD 41.52 million respectively. However, trade deficits were registered with the Rest of Africa, Asia and the Rest of Europe worth (USD 341.15 million), (USD 174.88 million) and (USD 5.23 million) accordingly.
| Region | Jan 2025 | Dec 2025 | Jan 2026 |
|---|---|---|---|
| Middle East | 181.16 | 513.32 | 559.9 |
| European Union | 74.12 | 104.57 | 77.23 |
| EAC | -3.61 | -186.07 | 41.52 |
| Rest of Europe | 3.58 | -4.91 | -5.23 |
| Asia | -302.99 | -248.62 | -174.88 |
| Rest of Africa | -174.12 | -366.19 | -341.15 |
| Other Countries | 6.58 | -18.52 | -10.12 |
4 Fiscal Developments13
Government operations during February 2026 resulted in a net borrowing (fiscal deficit) of Shs. 1,221.53 billion, which was higher than the programmed target of Shs. 985.85 billion. This deviation was mainly driven by expenditure that exceeded projections, particularly on grants (part payment to Uganda Airlines for the purchase of new aircrafts) and interest payments (due to front loading of domestic borrowing to align with the timing of Government expenditure), both of which surpassed their monthly plans by 13.1 percent and 5.1 percent, respectively.
| Shs Billion | Program | Outturn | Performance | Deviation |
|---|---|---|---|---|
| Revenues (Including grants) | 2,881.94 | 2,613.31 | 90.7% | -268.63 |
| Domestic Revenue | 2,751.84 | 2,571.76 | 93.5% | -180.08 |
| Taxes | 2,501.57 | 2,443.8 | 97.7% | -57.77 |
| Other revenue (Non-tax revenue) | 250.26 | 127.96 | 51.1% | -122.3 |
| Grants | 130.11 | 41.55 | 31.9% | -88.56 |
| Project support | 130.11 | 41.55 | 31.9% | -88.56 |
| Expense | 3,424.73 | 3,390.15 | 99.0% | -34.58 |
| Compensation of employees | 515.42 | 501.14 | 97.2% | -14.28 |
| Purchase of goods and services | 720.96 | 655.99 | 91.0% | -64.97 |
| Interest | 979.68 | 1,029.51 | 105.1% | 49.83 |
| o/w: domestic | 854.46 | 929.7 | 108.8% | 75.24 |
| o/w: foreign | 125.22 | 99.8 | 79.7% | -25.42 |
| Grants | 978.8 | 1,107.46 | 113.1% | 128.66 |
| Social benefits | 100.08 | 53.92 | 53.9% | -46.16 |
| Other expense | 129.78 | 42.13 | 32.5% | -87.65 |
| Gross operating balance | -542.79 | -776.84 | 143.1% | -234.05 |
| Net Acquisition of Nonfinancial Assets | 443.06 | 444.69 | 100.4% | 1.63 |
| Net lending/borrowing (surplus/deficit) | -985.85 | -1,221.53 | 123.9% | -235.68 |
| __ | __ | __ | __ | __ |
| __ | __ | __ | __ | 235.68 |
4.1 Revenues and Grants
During the month of February 2026, total revenue (including grants) amounted to Shs. 2,613.31 billion against the target of Shs. 2,881.94 billion translating into a performance rate of 90.7 percent and a shortfall of Shs. 268.63 billion. The underperformance was mainly driven by shortfalls in domestic revenue, non-tax revenue (other revenue), and grants.
4.2 Domestic Revenues
Domestic revenue collections in February 2026, registered a shortfall of Shs. 180.08 billion against the target of Shs. 2,751.84 billion. This performance was largely due to the lower than targeted performance across major tax categories, with the exception of direct domestic taxes.
Indirect domestic taxes registered a shortfall of Shs. 15.33 billion against a target of Shs. 742.19 billion, mainly due to lower-than-expected collections from Value Added Tax (VAT) particularly from wholesale and retail trade, hotels and restaurants, and mining & quarrying as well as excise duty on phone talk time, soft drinks, levy on cash withdrawals, among others. International trade taxes posted a shortfall of Shs. 82.79 billion against a target of Shs. 1,049.45 billion, largely on account of lower collections from import duty and VAT on imports.
Direct domestic taxes, however, performed above target, amounting to Shs. 789.87 billion, representing a surplus of Shs. 14.40 billion against the target of Shs. 775.47 billion. This was supported by strong performance in Pay as You Earn (PAYE), corporate tax, and taxes on treasury bills.
Non tax revenue (Other revenue) - Non-tax revenue collections amounted to Shs. 127.96 billion, against a target of Shs. 250.26 billion, resulting in a shortfall of Shs. 122.30 billion. This underperformance reflects lower-than-anticipated collections from administrative fees.
Total grants received in February 2026 amounted to Shs. 41.55 billion, against a target of Shs. 130.11 billion, implying a performance rate of 31.9 percent and a shortfall of Shs. 88.55 billion. This was largely due to the delay in disbursement of budget support and lower-than-projected disbursements of project grants.
4.3 Expenditure
In February 2026, total expenses amounted to Shs. 3,390.15 billion, slightly below the planned Shs. 3,424.73 billion. However, expenses in certain areas exceeded expectations for the month, particularly interest payments and grants, which were higher than initially projected. Grants from the Central Government to other levels of Government amounted to Shs. 1,107.46 billion, surpassing the planned Shs. 978.80 billion. This increase was mainly driven by additional funding directed toward Uganda National Airlines, as well as the capitalization of institutions and financing schemes.
Interest payments for the month amounted to Shs. 1,029.51 billion, exceeding the planned Shs. 979.68 billion. This was largely driven by domestic interest payments, which were higher than anticipated by Shs. 75.24 billion. This was due to the front loading of domestic borrowing to align with the timing of Government expenditures. In contrast, expense on compensation of employees and purchases of goods and services fell below projections, registering shortfalls of Shs. 14.28 billion and Shs. 64.97 billion, respectively. The underperformance in compensation of employees was mainly attributed to lower-than-expected spending on allowances and employer social security contributions.
During the month of February 2026, Government spent a total of Shs. 444.69 billion on acquisition of non-financial assets which was slightly higher than the planned amount of Shs. 443.06 billion. This performance was mainly driven by acquisition of facilities and equipment management, road rehabilitation, amongst others.
5 East Africa Community Developments
5.1 EAC Inflation14
Annual headline inflation exhibited mixed trends across EAC Partner states in February 2026. Inflation eased in Uganda, Kenya, Tanzania and Burundi, but increased in Rwanda and Somalia during the period under review, as shown in Figure 23. In Kenya, Annual headline inflation reduced slightly to 4.3 percent in February 2026, from 4.4 percent in January 2026 on account of lower transport costs (particularly country bus/matatu fares from one town to another) and lower cost of utilities such as electricity among others.
Similarly, Tanzania’s Annual headline inflation declined to 3.2 percent in February 2026 from 3.3 percent in January 2026, largely driven by a slowdown in the rate at which prices were increasing for items under health and transport categories.
Annual headline inflation for Burundi decreased in January 2026 to 12.6 percent from 15.2 percent in December 2025 mainly on account of slower price increases for food items such as fish, cooking oil and vegetables.
In contrast, inflation in Rwanda rose further to 7.9 percent in February 2026 from 7.5 percent in January 2026 largely reflecting higher prices in key categories such as housing & utilities, restaurants & hotels, alcoholic beverages and transport. This was largely because of higher energy and transport costs amid regional and global tensions, alongside increasing costs within the services sector.
In Somalia , Annual Headline inflation increased to 5.1 percent in December 2025 from 4.8 percent the previous month with overall price pressures stemming from costs of services particularly restaurant & accommodation and health services.
5.2 EAC Exchange Rates15
Separate from Kenya, local currencies within the EAC Partner States recorded losses against the US dollar in February 2026. The Tanzanian shilling recorded the biggest depreciation, falling in value by 3.6 percent in February 2026, mainly due to reduced foreign exchange earnings from key sectors such as agriculture, mining, and tourism, which typically experience seasonal slowdowns. At the same time, higher demand for the US dollar by importers especially ahead of the Chinese New Year exerted pressure on the currency.
Likewise, the Ugandan Shilling, Burundian Franc, and Rwandan Franc depreciated by 0.2 percent in February 2026 as demand for the US Dollar outpaced its supply during the month.
The Kenyan Shilling remained unchanged at Shs. 129.02 per US dollar, the same rate recorded in January 2026.
5.3 Trade Balance with EAC16
During the month of January 2026, Uganda traded at a surplus of USD 41.52 million with the East African Community Partner states, an improvement when compared with the deficit of (USD 186.07 million) registered in December 2025. This improvement in the trade balance was a result of a decline in imports from the region by 53.0 percent (246.52 million), which more than offset the 6.8 percent fall in the exports to the region. Imports declined from USD 465.43 million in December 2025 to USD 218.91 million in January 2026, whereas exports fell from USD 279.35 million to USD 260.43 million.
Similarly on an annual basis, Uganda traded at a surplus in January 2026 with the EAC partner states, an improvement from the deficit of (USD 3.61 million) recorded in January 2025. This improvement was largely attributed to an increase in exports, coupled with a decrease in imports.
At a country specific level in January 2026, Uganda traded at a surplus with the Democratic Republic of Congo, South Sudan, Rwanda and Burundi amounting to USD 101.79 million, USD 45.76 million, USD 30.24 million and USD 3.82 million, accordingly. However, deficits were recorded with Tanzania and Kenya worth (USD 32.15 million) and (USD 107.95 million) respectively. The deficit with Tanzania dropped significantly from USD 249.34 million in December 2025 to USD 32.15 million in January 2026. Uganda has registered relatively large deficits with Tanzania because of small exports and large imports with the partner. This is partly attributed to non-tariff barriers that constrain exports to Tanzania, an issue that needs to be addressed at the level of the East African Community Secretariat.
Glossary
| Term | Description |
|---|---|
| Bid to cover ratio | This is an indicator for the demand of Government securities in a given auction. A ratio equal to 1 means that the demand for a particular security is equal to the amount offered by the government. A ratio less than 1 means the auction is under subscribed and a ratio greater than 1 means that the auction is over subscribed. |
| BTI | The Business Tendency Index measures the level of optimism that executives have about current and expected outlook for production, order levels, employment, prices and access to credit. The Index covers the major sectors of the economy, namely construction, manufacturing, wholesale trade, agriculture and other services. The Overall Business Tendency Index above 50 indicates an improving outlook and below 50 a deteriorating outlook. |
| CIEA | CIEA is constructed using seven variables, that is; private consumption estimated by VAT, private investment estimated by gross extension of private sector credit, government consumption estimated by its current expenditure, government investment estimated by its development expenditure, excise duty, exports and imports. Data comes with a lag of one month. |
| Core Inflation | This is a subcomponent of headline inflation that excludes items subject to volatility in prices. It excludes energy, fuels, utilities, food crops and related items. |
| Headline Inflation | This refers to the rate at which prices of general goods and services in an economy change over a period of time usually a year. |
| Non-Performing Loan | This is a sum of borrowed money upon which the debtor has not made scheduled payments for a period usually at least 90 days. |
| Tenor | This refers to the time-to-maturity of a financial instrument, for example, if a certain instrument matures after 91 days – it is called a 91-day tenor. |
| PMI | The PMI is a composite index, calculated as a weighted average of five individual sub-components; New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stocks of Purchases (10%). It gives an indication of business operating conditions in the Ugandan economy. The PMI above 50.0 signals an improvement in business conditions, while readings below 50.0 show a deterioration. The PMI is compiled on a monthly basis by Stanbic Bank Uganda. |
| Yield to Maturity (YTM) | Yield to maturity (YTM) is the total return anticipated on a treasury instrument if the instrument is held until it matures. |
| Month on Month | Is a way to measure the percentage change in a value from one month to the next. |
| Year on Year | Is a method of comparing data for a specific period (e.g., a month or quarter) with the same period in the previous year. |
Online Resources
Visit us online at mepd.finance.go.ug.
The entire history of data used for this and previous Performance of the Economy Reports - subject to data revisions - can be downloaded at mepd.finance.go.ug/apps/macro-data-portal.
An interactive display of leading economic indicators and a GDP nowcast is available at mepd.finance.go.ug/apps/macro-monitor.
Data on Private Sector Credit, CIEA and External sector has a lag of one month.↩︎
Data is reported with a lag↩︎
Revenue and Expenditure numbers are still undergoing reconciliation↩︎
Data on inflation for D.R.C and South Sudan is not readily available.↩︎
Data on Exchange Rates for D.R.C, South Sudan and Somalia not readily available.↩︎
Data on the CIEA has a lag of one month.↩︎
Data comes with a month lag.↩︎
Data on Private Sector Credit has a lag of one month.↩︎
Data on Private Sector Credit has a lag of one month.↩︎
Statistics on trade come with a lag of one month.↩︎
Other Countries include: Australia and Iceland.↩︎
Statistics on trade come with a lag of one month.↩︎
Fiscal data is preliminary.↩︎
Data on inflation for D.R.C and South Sudan not readily available.↩︎
Data on Exchange Rates for D.R.C, South Sudan and Somalia not readily available.↩︎
Data for Somalia not readily available↩︎