For any Ugandan out there, the value of a US dollar against the Uganda shilling needs no sweet-talking. We all know it is way bigger than our shilling, even though most of us may not track the exact rate daily. For instance, the dollar hovers around UGX 3,700 to UGX 3,800 today, a noticeable jump from just a few years ago when it was closer to UGX 2,500. For that reason, many Ugandans have realized that saving in dollars not only secures their wealth but also provides an opportunity for a “passive profit” when the exchange rate shifts. I mean, I can save 1 dollar today valued at 3500 and then next week it’s valued at 3800 shillings. This volatility alone of the Ugandan shilling against the dollar has encouraged many to put big cash in dollar accounts, only withdrawing when the value is higher…talk about a safer kind of day trading.
But while this idea of profiting from exchange rates is enticing, it’s not the main reason many Ugandans are stocking up on dollars. Overall currency stability has been the main appetizer for both everyday savers and economists.
Let’s face it, as a country, our currency has been losing purchasing power over the years. Does anyone remember the times land could be bought at 10,000 shillings? Or the days when UGX 200 was enough for break-time snacks at school? Now? The same UGX 200 barely buys you a stick of gum. You can burn through a million shillings on rent, food and transport.
The dollar, however, offers some kind of shield from this depreciation. True, it also fluctuates, but its purchasing power remains relatively stable globally. In simpler terms, a US dollar in 2010 could buy roughly the same amount of goods in 2024, compared to the Ugandan Shilling, which has seen significant devaluation over the same period.
Another reason for the dollar’s rising popularity is the growth of e-commerce and cross-border trade in Uganda, as we explain in our article, The Growth of Uganda’s E-commerce: Convenience, Choice & Economic Boost. As more Ugandans engage in online shopping, freelancing, and importing goods, having access to dollars is becoming increasingly essential.
Platforms like Amazon, Alibaba, and even freelance job boards frequently used by youth for gig work often require payments or withdrawals in dollars. For merchants sourcing stock from abroad, a dollar account simplifies transactions and eliminates the hefty costs of currency conversion.
As to why the dollar makes sense for savers;
- Hedge Against Inflation: The dollar protects savings from inflation-driven depreciation that reduces the value of the Uganda shilling.
- Facilitate Global Access: Having savings in dollars makes it easier to access global markets and investment opportunities.
- Ensure Stability: While no currency is immune to shock, the dollar has maintained a global standard, making it a safer choice for long-term savings.
However, while saving in dollars has its advantages, there are challenges too. Many banks require higher minimum balances for dollar accounts, which may not be accessible to everyone. Additionally, foreign currency accounts can sometimes come with higher maintenance fees.
Other than that, Ugandans are becoming more financially savvy, moving beyond traditional savings methods to embrace global money management strategies. Dollar savings are just one example, alongside options like trust funds and stock securities.
Whether it’s about protecting their wealth, preparing for international transactions, or simply making the most of exchange rate fluctuations, the dollar is proving to be a smart choice for many Ugandans.
For those considering this route, a little financial planning and guidance can go a long way. After all, it’s not just about saving—it’s about saving smart.
