Uganda’s economy registered an improvement in January 2026, supported by better business conditions, rising consumer demand and increased employment levels, according to the latest Performance of the Economy Report.
The report indicates that economic activity continued on an upward trajectory during the month under review, reflecting sustained resilience across key sectors.
“Economic activity during January 2026 continued to improve, characterized by improvements in business conditions, increased consumer demand, and employment,” the report states.
High frequency indicators further signaled optimism within the private sector. The Purchasing Managers’ Index and the Business Tendency Index both remained above the 50 mark threshold, a level that signals expansion in economic activity and a positive business outlook.
“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 outlook respectively,” the report notes.
However, inflation registered a slight uptick during the month. Annual headline inflation rose to 3.2 percent in January 2026 from 3.1 percent recorded in December 2025. The increase was mainly attributed to higher core inflation as well as rising Energy, Fuel and Utilities costs.
“Annual headline inflation slightly increased to 3.2 percent in January 2026 from 3.1 percent in December 2025, mainly on account of an increase in both core and Energy, Fuel and Utilities inflation,” the report explains.
On the currency front, the Ugandan Shilling strengthened against the US Dollar. During January, the Shilling appreciated by 0.4 percent, trading at an average mid rate of Shs3,562.14 per dollar compared to Shs3,575.23 in December 2025.
The appreciation was largely attributed to global weakening of the US Dollar alongside increased foreign exchange inflows from exports and portfolio investments.
“In January 2026, the Ugandan Shilling appreciated by 0.4 percent against the US Dollar… This performance was largely driven by the global weakening of the US Dollar, coupled with increased foreign inflows from exports and portfolio investors,” the report states.
Monetary policy remained steady during the period, with the Central Bank Rate maintained at 9.75 percent for the sixteenth consecutive month. Authorities indicated that the rate remains appropriate to sustain economic recovery while anchoring inflation expectations toward the medium term target.
“The Central Bank Rate remained unchanged at 9.75 percent in January 2026… 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 report adds.
Meanwhile, Uganda’s external trade position showed notable improvement. On a year on year basis, the merchandise trade deficit narrowed by 24 percent to $206.42 million in December 2025 from $271.65 million recorded in December 2024.
The improvement was driven by a sharp rise in export earnings, particularly from mineral products and coffee.
Merchandise export receipts surged by 83.5 percent, rising from $760.31 million in December 2024 to $1.395 billion in December 2025. The growth was largely supported by increased earnings from coffee, mineral products, and cocoa beans.
Overall, the report shows a recovering economy supported by strong export performance, stable monetary policy, and improving business confidence, despite a modest rise in inflation.
