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The Ugandan government has issued a strict directive banning all public sector contracts and procurement processes from being conducted in foreign currencies, reinforcing the use of the Ugandan Shilling (UGX) for all transactions.
Ramadhan Ggoobi, the Permanent Secretary and Secretary to the Treasury (PSST), announced the measure in the Budget Execution Circular for Financial Year 2025/26.
He said this was needed to protect the stability and competitiveness of the local currency.
The directive aligns with Uganda’s Public Finance Management Act and follows President Yoweri Museveni’s assent to the Appropriation Bill for FY 2025/26 on 30th June 2025.
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The new guidelines mandate that all government contracts—except those explicitly tied to foreign financing agreements—must be quoted and paid in Ugandan Shillings.
Accounting Officers across all government entities are now mandated to adhere strictly to these guidelines.
This means that all planned procurements, whether conducted via the e-GP system or the Integrated Financial Management System (IFMS), must be undertaken in Ugandan shillings.
Ggoobi stated that the objective is to mitigate the risk of cost escalations that can arise from volatile fluctuations in global foreign exchange rates.
Furthermore, all contracts, even those under international competitive bidding, are to be quoted in Ugandan shillings, with the only exception being financing agreements where Development Partners explicitly require the use of foreign currencies for both the bidding and payment processes.
Ugandan Shilling's Robust Performance
The move comes amid a strong performance by the Ugandan Shilling, which has recently been ranked among the most stable and best-performing currencies in the world.
Recent reports from the Ministry of Finance have indicated that the shilling emerged among the strongest currencies in Africa, defying economic challenges faced by several other countries.
The report indicated that the shilling had appreciated by 0.8 per cent year-to-date and further strengthened by 0.5 per cent against the US dollar.
This impressive performance has been attributed to an increased supply of foreign currency, surpassing demand, driven by robust coffee inflows and favourable international commodity price hikes.
Strategic Financial Management for FY 2025/26
The directive on local currency transactions is part of the broader Budget Execution Circular for Financial Year 2025/26, which also outlines the Government’s Cash Flow Plan and administrative guidelines for effective budget implementation.
The FY 2025/26 budget marks the inaugural year of implementing the Fourth National Development Plan (NDP IV), which serves as the foundational plan for the ambitious Tenfold Growth Strategy.
Consequently, the budget prioritises strategic investments aligned with NDP IV's objectives.
Furthermore, this financial year is critical as the country prepares for national general elections, requiring the budget to prioritise actions that ensure a secure, peaceful, and successful electoral process.
Addressing Domestic Arrears and Ensuring Accountability
A focus of the new circular is the government’s strategic initiative to eliminate domestic arrears over the next three financial years, commencing with FY 2025/26.
For this fiscal year alone, Shs 1.4 trillion has been allocated specifically for the payment of existing domestic arrears.
These payments will be prioritised across several crucial categories, including domestic suppliers of goods and services, statutory expenses, contractors for various sectors (works, transport, energy, water), taxes and deductions, utilities, and compensations managed by entities such as the Uganda Land Commission and the Ministry of Justice and Constitutional Affairs.
To ensure accountability and prevent future accumulation of arrears, Ggoobi instituted stringent measures.
Payments of existing arrears will only proceed after verification by an independent audit firm appointed by the Ministry.
Accounting Officers face sanctions, including non-renewal of contracts, for creating new domestic arrears.
Furthermore, they are prohibited from signing any new contracts without prior confirmation of resource availability.
Multi-year contracts will now take precedence as a first call on available resources, and Accounting Officers who enter into contracts without confirmed funds will be held personally liable.