KNBS explains why 4.3% inflation had a bigger economic impact than 15.1% in Kenya

Uganda's inflation rate reached a three-year high in October, with consumer prices increasing by 5.8% from the previous month. The sharp rise in food and energy costs contributed to the inflation spike, which now stands at 5.8% in October, the highest since June 2023. Core inflation, which excludes volatile food and energy prices, rose to 4.4% from 3.7% in September.

The weakening Ugandan shilling against the US dollar is the primary driver behind the inflation surge. The currency has depreciated by nearly 15% since June, trading at around 4,245 shillings per dollar. This depreciation threatens Kenya's Ksh162 billion export market, as Uganda remains Kenya's largest export destination in Africa.

Kenya's imports from Uganda have increased by 24.5% in 2025, with sugar, dairy products, wood, coffee, iron and steel, and agricultural products among the main exports. Kenyan exporters may face challenges as Ugandan buyers struggle with higher import costs and tighter household budgets. However, the currency movement could make Ugandan products more price-competitive in Kenya if exporters transfer exchange-rate savings to their prices.

The Bank of Uganda raised its benchmark interest rate by 225 basis points to 12% in an attempt to contain inflation and stabilize the currency. Despite this, the currency crisis and declining consumer purchasing power present significant challenges for Kenyan businesses, who must consider the potential impact on pricing, payment arrangements, and exposure to the Ugandan market.