Masaba Urges Government to Use $6.5bn Reserves to Stabilise Shilling

Industrial Division Member of Parliament, Hon. Karim Masaba, has urged the government to consider using part of Uganda’s growing foreign exchange reserves to help stabilise the Uganda shilling amid renewed pressure on the local currency.

Masaba made the call in Parliament on Tuesday, October 6, 2026, during debate on the depreciation of the shilling against the United States dollar and its implications for traders, fuel prices and the wider cost of doing business.

The MP said Uganda’s foreign exchange reserves have risen to about US$6.5 billion, arguing that the country should examine how the reserves can be deployed to cushion the shilling and reduce the financial burden being faced by businesses that depend on imported goods.

His remarks came after Leader of the Opposition Rt. Hon. Joel Ssenyonyi raised concerns over the continued depreciation of the shilling and its impact on the cost of imports and living expenses. Parliament reported that Ssenyonyi warned that the weakening currency was increasing the cost of doing business, particularly for importers who need foreign currency to pay for goods and services.

Masaba questions use of reserves

Masaba questioned why the government and the central bank would not consider using the stronger reserve position to intervene in the foreign exchange market.

He said traders were particularly concerned about the effect of the rising dollar on goods that had already been purchased or were still in transit.

“Some of these goods have just arrived and some others are still in transit. The prayer of these traders is that URA and the Ministry of Finance hold on to the previous rate, because their goods were purchased at the older lower rate,” Masaba said.

He further questioned the decision to increase the cash reserve requirement for commercial banks instead of using the country's foreign exchange position to support the shilling.

“The Minister for Finance can explain to us why this move has been taken, because we would expect in such a situation, that these reserves would be used to stabilize the shilling such that many of our traders do not lose out,” he added.

Masaba's proposal effectively puts the management of Uganda's international reserves at the centre of the current debate over the exchange rate, with the MP seeking an explanation from government on how the reserves are being used to address currency pressures.

Rising dollar raises import costs

The debate comes at a time when increased demand for foreign currency has put pressure on the shilling.

According to the Ministry of Economic Planning and Development's August 2026 performance report, the shilling depreciated by 0.7 percent against the US dollar in August, moving from an average of Shs3,704.51 per dollar in July to Shs3,730.25.

The ministry attributed the depreciation largely to increased demand for foreign currency from the energy and manufacturing sectors. Petroleum companies required more dollars to finance fuel imports, while manufacturers and other businesses also needed foreign currency to purchase raw materials, machinery and intermediate goods.

Although inflows from commodity exporters, non-governmental organisations and remittances provided some support to the foreign exchange market, the ministry said they were insufficient to offset the increased demand for dollars.

For import-dependent businesses, a weaker shilling means that more Uganda shillings are required to purchase the same amount of foreign currency. The additional cost can ultimately be reflected in the prices of imported goods, fuel, machinery, raw materials and other products.

Reserves have strengthened significantly

Uganda's reserve position has indeed strengthened considerably over the past year. The Bank of Uganda's May 2026 Monetary Policy Report said gross international reserves stood at US$6.1 billion at the end of April 2026, representing an increase of more than 50 percent from US$4.0 billion a year earlier.

The International Monetary Fund subsequently reported that Uganda's gross international reserves had reached US$6.1 billion at the end of May 2026, equivalent to about 2.7 months of imports of goods and services. The IMF said strong capital inflows had supported the increase in reserves.

The Ministry of Finance had also reported in the FY2026/27 Budget Speech that reserves had risen to US$6 billion in the 12 months to March 2026, compared with US$3.6 billion a year earlier.

The figures cited by Masaba therefore come against a background of a substantial improvement in Uganda's foreign exchange buffer.

What are foreign exchange reserves used for?

The Bank of Uganda is responsible for managing Uganda's international foreign exchange reserves under the Bank of Uganda Act.

The central bank says the reserves are important for supporting monetary and exchange-rate policies, settling external obligations and safeguarding macroeconomic stability.

They also provide a buffer against external shocks, support external debt servicing and help meet the country's foreign currency requirements. The Bank says reserves are managed according to principles of safety, liquidity and prudent return.

This means that while reserves can provide the central bank with capacity to participate in the foreign exchange market, they are also held to meet broader national financial obligations and protect the economy against external shocks.

The debate in Parliament therefore raises the question of how much of the reserve stock can appropriately be used for exchange-rate intervention without weakening Uganda's ability to meet those other obligations.

Pressure extends beyond traders

The exchange-rate debate has also been linked to the rising cost of fuel.

Ssenyonyi told Parliament that petrol and diesel prices had reached levels of between Shs6,800 and Shs7,000 per litre, warning that high pump prices were feeding into the cost of living, including food, clothing and school fees.

Masaba also called for government intervention on the way import taxes are calculated, arguing that traders whose goods were purchased when the shilling was stronger could face higher tax bills if the Uganda Revenue Authority applies the prevailing exchange rate when assessing their imports.

Other MPs joined the debate, with Hon. Cohen Amanya, Igara County West MP, saying traders feared that imports purchased at an earlier, lower exchange rate could be assessed using the current exchange rate.

Amanya warned that continued exchange-rate pressure could affect fuel prices and the cost of factors of production.

Parliament seeks government response

Following the concerns raised by MPs, Deputy Speaker Rt. Hon. Thomas Tayebwa directed the Minister for Finance, Planning and Economic Development and the Minister for Energy and Mineral Development to provide statements to Parliament on the cost of the dollar and rising pump prices respectively. 

The development means the government is expected to explain its policy response to the recent pressure on the shilling, including how foreign exchange reserves, monetary measures and other economic interventions are being used to maintain stability.

For Masaba, the central issue is whether Uganda's stronger foreign exchange position can be used more directly to protect traders and businesses from the effects of a weakening shilling.

His proposal now adds another dimension to the parliamentary debate: whether Uganda should deploy part of its expanded foreign exchange reserves to support the local currency, or preserve the reserves primarily as a financial buffer against external shocks and future foreign-currency obligations.