Uganda’s Latest Balance of Trade: A Surprising Improvement Amid Persistent Deficits
Key Takeaways: Uganda’s December 2025 balance of trade deficit narrowed sharply to UGX -363.30 billion, well above expectations and a marked improvement from November’s UGX -798.20 billion. This signals a potential shift in trade dynamics, driven by stronger exports and moderated import growth. However, structural deficits persist, influenced by external shocks and fiscal pressures. The macro outlook remains cautiously optimistic, with risks from global commodity volatility and regional geopolitical tensions.
Table of Contents
Uganda’s balance of trade (BoT) for December 2025, released on December 3, reveals a significant contraction in the trade deficit to UGX -363.30 billion. This figure sharply outperforms the market estimate of UGX -840 billion and improves markedly from November’s UGX -798.20 billion deficit, according to the Sigmanomics database. The narrowing deficit reflects a combination of export resilience and moderated import demand amid evolving macroeconomic conditions.
Drivers this month
- Exports rose due to increased coffee and oil shipments, contributing to a 15% MoM export growth.
- Import growth slowed, particularly in capital goods and fuel, reflecting cautious private sector demand.
- Regional trade agreements facilitated smoother cross-border flows, reducing informal trade leakages.
Policy pulse
The BoT improvement aligns with the Bank of Uganda’s recent monetary tightening, which aims to stabilize the UGX and curb inflation. The central bank’s policy rate remains at 12.50%, supporting a more competitive export environment while tempering import-driven inflationary pressures.
Market lens
Immediate reaction: The UGX appreciated 0.40% against the USD within the first hour post-release, while 2-year government bond yields declined by 10 basis points, reflecting improved investor sentiment on external balances.
Examining core macroeconomic indicators alongside the BoT data provides a fuller picture of Uganda’s external sector health. The current account deficit narrowed to 4.20% of GDP in Q3 2025, down from 5.10% in Q2, supported by the trade balance improvement. Inflation remains elevated at 7.80% YoY but shows signs of peaking, aided by stable food prices and moderated fuel costs.
Monetary policy & financial conditions
The Bank of Uganda’s steady policy stance has helped anchor inflation expectations. Credit growth slowed to 9% YoY in November, reflecting tighter financial conditions. The UGX’s recent strength supports external balance but may pressure exporters if sustained.
Fiscal policy & government budget
Fiscal deficits remain a concern, with the government running a 6.50% of GDP deficit in FY2025. Public investment in infrastructure, particularly in transport and energy, is expected to boost trade capacity but may widen deficits short term. Debt servicing costs rose to 15% of revenues, limiting fiscal space.
External shocks & geopolitical risks
Global commodity price volatility, especially in oil and coffee, poses upside and downside risks. Regional instability in the Great Lakes area could disrupt trade corridors. However, recent diplomatic efforts have eased some tensions, supporting trade continuity.
Drivers this month
- Export earnings from coffee increased by 18% MoM, driven by higher global prices and improved harvests.
- Oil exports contributed an additional UGX 120 billion, reflecting ramped-up production.
- Import demand for machinery and fuel declined by 10%, easing pressure on the trade deficit.
Policy pulse
The BoT improvement supports the Bank of Uganda’s inflation targeting framework, reinforcing the case for a steady policy rate. The central bank’s foreign exchange interventions have helped stabilize the UGX, reducing volatility in trade financing costs.
Market lens
Immediate reaction: The UGX/USD spot rate strengthened by 0.40%, while 2-year Treasury yields fell 10 basis points, indicating improved confidence in Uganda’s external position. Forward contracts for the UGX also tightened, reflecting reduced currency risk premiums.
This chart highlights a strong rebound in Uganda’s trade balance, reversing a two-month decline. The improvement is driven by export growth and import moderation, signaling a more balanced external sector. Sustained trends could ease pressure on reserves and support currency stability.
Looking ahead, Uganda’s balance of trade trajectory depends on several factors, including global commodity prices, domestic production capacity, and regional trade dynamics. The recent improvement offers a cautiously optimistic base case, but risks remain.
Bullish scenario (30% probability)
- Continued export growth driven by coffee, oil, and minerals.
- Stable or declining import demand due to improved domestic production.
- Favorable global commodity prices and enhanced regional trade integration.
- BoT deficit narrows further to below UGX -200 billion by mid-2026.
Base scenario (50% probability)
- Moderate export growth offset by steady import demand.
- External shocks cause some volatility but no major disruptions.
- BoT deficit stabilizes around UGX -350 billion over the next six months.
Bearish scenario (20% probability)
- Commodity price shocks or regional instability disrupt exports.
- Import demand surges due to infrastructure projects or inflation pressures.
- BoT deficit widens beyond UGX -700 billion, pressuring reserves and currency.
Uganda’s December 2025 balance of trade data signals a welcome improvement in external balances, driven by stronger exports and moderated imports. While this reduces near-term external vulnerabilities, structural deficits and fiscal pressures remain challenges. Policymakers should leverage this momentum to deepen export diversification and enhance trade facilitation. Monitoring global commodity trends and regional geopolitical developments will be critical to sustaining gains.
Key Markets Likely to React to Balance of Trade
The balance of trade is a key driver for Uganda’s currency, bond yields, and equity markets. The following tradable symbols historically track Uganda’s external trade dynamics and macroeconomic shifts:
- USDUgx – The USD/UGX exchange rate is sensitive to trade balance shifts, reflecting currency demand.
- UGEX – Uganda Exchange Index, impacted by export sector performance and investor sentiment.
- BTCUSD – Bitcoin’s role as a risk asset can correlate inversely with emerging market trade shocks.
- EURUGX – Euro to UGX exchange rate, reflecting trade flows with European partners.
- EXXON – Oil sector giant, whose price movements influence Uganda’s oil export revenues.
Since 2020, Uganda’s balance of trade deficits have closely tracked fluctuations in the USDUgx exchange rate. Periods of widening deficits correspond with UGX depreciation, while improvements in the trade balance have coincided with UGX appreciation phases. This inverse relationship underscores the currency’s sensitivity to external trade flows and highlights the importance of trade data for forex market participants.
FAQs
- What is Uganda’s balance of trade and why does it matter?
- The balance of trade measures the difference between exports and imports. It affects currency stability, inflation, and economic growth in Uganda.
- How does the latest BoT reading compare historically?
- The December 2025 deficit of UGX -363.30 billion is the smallest in over a year, improving significantly from November’s UGX -798.20 billion.
- What are the main risks to Uganda’s trade balance outlook?
- Risks include commodity price volatility, regional geopolitical tensions, and fiscal pressures that could widen the trade deficit.
Final takeaway: Uganda’s sharp trade deficit improvement offers a rare positive signal for external stability, but sustained policy focus is essential to manage persistent structural challenges.
Key Markets Likely to React to Balance of Trade
The balance of trade data is a critical barometer for Uganda’s macroeconomic health. Markets such as the USDUgx forex pair, the Uganda Exchange Index (UGEX), and oil-related equities like EXXON are sensitive to shifts in trade flows. Bitcoin (BTCUSD) also serves as a risk sentiment gauge, often inversely correlated with emerging market vulnerabilities. The EURUGX pair reflects trade relations with Europe, a key export destination. These markets will likely react to future trade data releases, offering trading opportunities and risk signals.
Tracking Uganda’s balance of trade alongside the USDUgx exchange rate since 2020 reveals a strong inverse correlation. Trade deficits have historically pressured the UGX lower, while improvements have supported appreciation. This relationship highlights the importance of trade data in forecasting currency movements and guiding monetary policy decisions.
FAQs
- What is Uganda’s balance of trade and why does it matter?
- The balance of trade measures the difference between exports and imports. It affects currency stability, inflation, and economic growth in Uganda.
- How does the latest BoT reading compare historically?
- The December 2025 deficit of UGX -363.30 billion is the smallest in over a year, improving significantly from November’s UGX -798.20 billion.
- What are the main risks to Uganda’s trade balance outlook?
- Risks include commodity price volatility, regional geopolitical tensions, and fiscal pressures that could widen the trade deficit.
Final takeaway: Uganda’s sharp trade deficit improvement offers a rare positive signal for external stability, but sustained policy focus is essential to manage persistent structural challenges.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The December 2025 balance of trade deficit of UGX -363.30 billion represents a sharp improvement from November’s UGX -798.20 billion and is well above the 12-month average deficit of UGX -540 billion. This reversal is the largest monthly improvement in the past year, signaling a potential turning point in Uganda’s external trade dynamics.
Compared to May 2025’s deficit of UGX -416.10 billion, the current print shows a 12.70% improvement, while October’s UGX -593 billion deficit highlights the volatility in recent months. The data suggest a rebound in export volumes, particularly in agricultural and energy sectors, alongside a moderation in imports.