“You have to lose some level of happiness or enjoyment to survive,” Ggoobi (Left) said, arguing that locally produced foods could offer cheaper alternatives to imported household staples.The weakening shilling is forcing households to reconsider how they spend, but government’s call for people to adjust their lifestyles has drawn mixed reactions.Amid the debate, some are asking: how much of the strain is caused by external shocks, and how much reflects vulnerabilities within the domestic economy?As the shilling comes under pressure, government is urging households to change spending habits, with Ramathan Ggoobi, Permanent Secretary and Secretary to the Treasury, advising Ugandans to reduce discretionary spending and switch from imported goods to locally produced alternatives.Ggoobi said at several fora over the weekend, including FM radio interviews, that households needed to adjust to changing economic conditions rather than expect spending patterns to remain unchanged.“You have to lose some level of happiness or enjoyment to survive,” Ggoobi said, arguing that locally produced foods could offer cheaper alternatives to imported staples.“Why are you eating spaghetti at a time when inflation is rising and the exchange rate is high?” he asked, pointing to potatoes, cassava and matooke as alternatives.He also urged motorists to reduce unnecessary fuel consumption, including trips to drop off other people, as vehicle running costs rise.Ggoobi revealed that spending adjustments were already underway in government. He said half of the fuel budget for the second quarter of FY 2026/27 had been released, while expenditure on consumptive items had been reduced and growth-driving sectors, including agriculture and tourism, protected.His advice, which has attracted mixed reaction, comes amid pressure on households and businesses as the shilling loses value.Buying locally produced goods can reduce exposure to imported costs in some cases, although domestic prices are not insulated from depreciation. Fuel, fertiliser, machinery, transport and other production inputs become more expensive, pushing up prices of locally produced goods as well.Ggoobi’s appeal raises a question about who bears the cost of stabilising the economy.Some have argued that reducing unnecessary imports and fuel consumption may help individual households manage budgets, but it does not resolve underlying pressures on the currency, including demand for dollars to pay for imports and the widening merchandise trade deficit documented in the Ministry of Finance’s September economy report.Does a change in consumption habits guarantee that workers’ incomes will keep pace with prices? For households whose earnings are already stretched by food, transport and other essentials, room to cut spending may be limited.The advice reflects immediate difficulties facing households as the shilling weakens and imported goods become costlier. But it also shifts attention to the sacrifices consumers are expected to make while policymakers attempt to stabilise the economy.September Data Shows Scale of PressureThe Ministry of Finance, Planning and Economic Development’s September 2026 Performance of the Economy Report captures the scale of deterioration.The shilling depreciated by 3.7% against the US dollar in September, trading at an average mid-rate of Shs3,868.87 per dollar, compared with Shs3,730.25 in August.The decline followed a sharper weakening from around Shs3,604 in March to above Shs4,000 in early October, according to figures cited by Kabweri County MP Patrick Wakida.The weakening matters because Uganda relies on imports for petroleum products, machinery, vehicles, medicines and other goods. Importers need more shillings to buy the same dollars, increasing prices charged to businesses and consumers.The effects were reflected in September inflation. Annual headline inflation rose to 4.6% from 4.1% in August. Inflation for energy, fuel and utilities reached 14.5%, while prices of food crops and related items rose at a faster pace.Transport costs added to pressure. Taxi fares across different distances and long-distance bus fares increased by an average of 14.9% in September, compared with 14.2% in August.Apart from depreciation, the Ministry also identified higher international oil prices, unfavourable weather affecting food supplies and rising production and transport costs. A weaker shilling compounds these pressures by increasing the local-currency cost of imported fuel and other inputs, triggering a chain of price increases affecting production, distribution and household expenditure.Is It External or Domestic?Wakida argues that the difficulties are driven more by domestic factors than external developments.In an analysis published on his X account in October, he questioned why the shilling weakened more sharply than the Kenyan and Tanzanian currencies over the same period.“If it was war in the Middle East or a strong US dollar, all three would fall together. They didn’t. Only UGX fell,” he argued.He attributes part of the pressure to declining foreign-currency inflows and investor uncertainty, alleging that offshore investors withdrew between $400 million and $600 million over four months, reducing dollar supply.He links the alleged withdrawals partly to concerns surrounding the Protection of Sovereignty legislation enacted in May 2026, arguing that foreign investors may have sold government securities and converted proceeds into dollars before moving funds abroad.The extent to which the legislation contributed remains contested. Bank of Uganda Governor Michael Atingi-Ego has rejected the claim, pointing instead to the widening current-account deficit and reduced portfolio investment flows.Wakida also identifies the structure of Uganda’s petroleum imports as a source of pressure. He argues that Uganda National Oil Company’s role as sole importer has concentrated substantial dollar demand into relatively short periods, estimating the company needs $150 million to $180 million each month to finance fuel purchases.The wider issue is the balance between foreign-currency supply and demand. Uganda needs dollars to finance imports and meet external obligations, but availability depends on export receipts, tourism, remittances, investment and other inflows.Wakida argues Uganda is not fully benefiting from dollars generated by exports because some proceeds may remain outside the domestic market or may not be converted immediately. He cited gold, coffee and tourism as potential sources that could ease pressure.Others note that export earnings do not necessarily translate into immediate dollar supply, and the exchange rate is also influenced by timing of payments, capital flows and demand.However, the question remains whether the country’s economic structure generates and retains sufficient foreign exchange to finance imports without repeated currency pressure.Exports Up, Imports Up FasterThe September report provides evidence of external imbalance. Export receipts increased by 40.6% year-on-year to $1.49 billion in August 2026, up from $1.06 billion in August 2025. But imports rose even faster, by 66.5% to $2.31 billion from $1.39 billion. The merchandise trade deficit widened to $817.03 million in August, compared with $325.53 million a year earlier.The figures explain why rising exports alone do not guarantee a stronger currency. Government earned more from exports, but spent proportionately more on imports.Some imports, including machinery, vehicles and industrial equipment, are necessary for investment and production. Petroleum is also essential. Reducing imports indiscriminately could undermine production and growth.Analysts have challenged government to expand productive capacity, improve export competitiveness and increase value retained from goods sold abroad. A more diversified export base could reduce dependence on a small number of commodities whose prices fluctuate internationally.The Bank of Uganda has also highlighted the wider imbalance. In mid-October, Governor Atingi-Ego pointed to a goods trade deficit of $2.8 billion and a services deficit of $3.3 billion in the 12 months to August 2026.These figures suggest currency pressure is not simply about households buying too many imported goods.Policy Response: Tightening and Dollar SalesThe response has focused partly on reducing spending and encouraging local consumption.BoU has tightened monetary policy. On October 14, it raised the Central Bank Rate from 9.75% to 12%. On October 22, it began selling foreign currency to support the shilling.These measures illustrate the difficulty of stabilisation. Higher rates can help contain inflation and influence investment, but also raise borrowing costs. Forex sales can ease immediate pressure, but sustained intervention may be costly if dollar demand continues to exceed supply.Government must therefore balance currency stability with sustaining economic activity.Ggoobi’s call may help families manage budgets. Buying local foods can reduce exposure to some imported costs, while avoiding unnecessary journeys can lower fuel spending.But local production is not insulated from depreciation. Farmers and manufacturers also face higher costs for fuel, fertiliser, machinery, packaging and transport, which eventually feed into prices of locally produced goods. Nor can every household cut spending equally. Families already spending most income on food, transport and housing have less room than those with higher disposable incomes.If consumers cut spending because incomes no longer cover essentials, demand weakens. Businesses may delay investment, reduce recruitment or struggle to maintain sales. Measures intended to restore stability can impose immediate costs on the same households and businesses the economy needs to keep producing, spending and investing.Despite pressure, economic indicators still show expansion. The Purchasing Managers’ Index stood at 53.0 in September, above the 50-point threshold signalling improving private-sector conditions, though down from 55.0 in August. The Business Tendency Index remained optimistic at 55.80, down from 57.69. Meanwhile, the Composite Index of Economic Activity increased by 0.3% to 193.87 in August from 193.30 in July.Growth That Doesn’t Improve Lives?The question is whether the crisis can be explained mainly by global developments or whether domestic decisions have made Uganda more vulnerable.A recent analysis by the International Labour Organization reflects on a situation similar to Uganda’s. ILO Chief Economist Sangheon Lee argues that economic growth should be judged not only by how much an economy produces, but also by whether workers’ incomes and living standards improve.If households must continually sacrifice consumption because earnings cannot keep pace with costs, continued expansion alone offers an incomplete picture of wellbeing.Lee argued that growth and productivity gains do not automatically translate into higher wages, and that falling inflation does not mean prices have returned to earlier levels.“It means prices are rising more slowly. Where wages have failed to keep pace with earlier price increases, workers may continue to experience a decline in purchasing power even after inflation moderates,” he said.He also argued that low pay and low productivity can reinforce each other. Businesses with limited access to finance, technology and skills may struggle to raise productivity and pay higher wages, while poorly paid workers and low-profit enterprises have fewer resources to invest in skills.For Uganda, prices and transport costs are rising while the shilling weakens. That alone does not establish whether wages have kept pace.If businesses continue to expand while workers have less money after paying for essentials, how much of the growth is translating into better living standards?Lee argues that decent jobs should not be treated merely as an outcome of growth. Better wages and more productive employment can also drive growth by strengthening household demand, encouraging investment and helping businesses develop new capabilities.The weakening shilling has exposed vulnerabilities in Uganda’s external position, but the debate over its causes remains unresolved. The Ministry of Finance points to global oil prices, a stronger dollar, seasonal demand and speculation. BoU has highlighted the current-account deficit and reduced portfolio flows. Wakida argues domestic policy decisions, investor uncertainty and retention of export earnings have played a significant role.The challenge is to establish the relative contribution of each factor and determine which responses address underlying causes rather than merely managing symptoms.Ggoobi’s appeal may help people cope with higher costs, but changes in consumption habits cannot substitute for policies that improve foreign-currency earnings, strengthen domestic production and sustain investor confidence.Can economic growth alone guarantee better living standards if gains do not translate into higher real incomes and more productive jobs?The immediate task is to stabilise the shilling and contain inflation without unnecessarily undermining credit, investment and domestic demand.The longer-term task is to reduce vulnerability to imported shocks by expanding productive capacity, diversifying exports and creating jobs that generate higher and more secure incomes.Ultimately, Uganda’s economic performance must be judged by more than the volume of goods and services produced or the pace of business expansion. It must also be judged by whether people can afford essential goods, whether work provides a decent income and whether households are better equipped to withstand economic shocks.-URNThe post Growth Without Better Livelihoods: The Real Story Behind the Weakening Shilling appeared first on Business Focus.