For many Ugandan families, the latest inflation figures are more than economic statistics, they are a daily reminder of increasingly difficult financial choices. As the cost of fuel, electricity, transport and basic food items continues to rise, many households are being forced to choose between paying rent, keeping the lights on, buying food or seeking medical care. Others are reducing meal portions, cutting non-essential spending or relying on debt simply to make ends meet.
New figures released by Uganda Bureau of Statistics (Ubos) show annual headline inflation rose to 4 percent in July, up from 3.7 percent in June, signalling renewed pressure on household budgets after months of relative price stability. Although overall inflation remains within the Bank of Uganda’s medium-term target of 5 percent, the sharpest price increases have occurred in essential goods and services that account for the largest share of household expenditure. Energy, fuels and utilities recorded annual inflation of 14.9 percent, while transport costs rose 9.3 percent.
Food and non-alcoholic beverages inflation increased to 3.1 percent, driven by higher prices of staple commodities. Fuel remains one of the biggest contributors to the rising cost of living. Petrol prices increased by 29 percent in July, while diesel prices surged by 39 percent. Ubos also reported higher prices for mukene (silver fish), cooking oil, laundry soap, dry Nile perch and vegetables. The July inflation reading is the highest recorded since September 2025 under the Classification of Individual Consumption According to Purpose, the international framework used to measure household expenditure.
Food, housing, utilities and fuel continue to consume the largest share of household budgets, leaving families with little disposable income for healthcare, education and other necessities. Emmanuel Erem, a research fellow at Makerere University’s Economic Policy Research Centre (EPRC), says the latest inflation trends are steadily eroding the purchasing power of ordinary Ugandans, particularly low-income earners. ‘For households, the effect is a reduction in real purchasing power. Unless wages and incomes rise at the same pace, families must spend more to purchase the same goods and services,’ he says.
Poorer households, Erem says, are especially vulnerable because they spend a larger share of their incomes on food, transport, utilities and healthcare. He cites the example of mukene, one of Uganda’s most affordable protein sources, whose price has risen by about 25 percent, from Shs17,691 to Shs22,155 per kilogramme between July 2025 and July 2026. As living costs continue to rise, many households are adopting coping mechanisms with potentially long-term consequences. ‘They may reduce the quantity or quality of food consumed, postpone medical treatment, walk instead of paying transport fares, withdraw children from some school activities or eliminate spending on recreation,’ Erem says.
Inflation, therefore, notes has the potential to translate into poorer nutrition, reduced access to healthcare and a general deterioration in living standards. On the other Erem says the higher fuel and electricity prices ripple through the economy by raising production and transport costs. Small businesses are also feeling the pressure. Many operate on thin profit margins and lack the financial capacity to absorb higher operating costs while weak consumer demand limits their ability to pass those costs on to customers. However, Makerere University Business School Economic Forum director Fred Muhumuza, argues that the official inflation rate does not fully reflect the financial strain facing households.
He explains that inflation is calculated using a basket of about 350 goods and services with different expenditure weights. As a result, essentials such as fuel, electricity, groceries and transport, which households purchase frequently, appear less significant in the headline figure despite having the greatest impact on family budgets. ‘The real prices that have gone up are the ones that touch people the most,’ Muhumuza says. ‘Between December and July, diesel prices increased by 14 percent and petrol by 11 percent, yet inflation is reported at only 4 percent. We feel the impact of diesel every day because it feeds directly into transport costs and the prices of almost everything else,’ he says, noting that inflation becomes more painful when wages fail to keep pace with rising prices.
‘If your income hasn’t risen by at least the rate of inflation, then you are effectively poorer than you were a year ago,’ he says. To illustrate the point, Muhumuza distinguishes between nominal and real income, the amount of goods and services that income can actually buy. ‘If I had Shs10,000 and fuel cost Shs5,000 per litre, my real income was equivalent to two litres. Today, when fuel costs Shs6,500 per litre, the same Shs10,000 buys less than two litres.’ He also points to ‘shrinkflation’, where products retain the same selling price but become smaller. ‘A chapati may still cost Shs1,000, but it is becoming smaller because producers cannot easily increase prices for consumers whose incomes have stagnated.’
The squeeze on household budgets reflects Engel’s Law, which holds that when incomes come under pressure, families protect spending on essentials such as food, rent, transport and school fees, while cutting discretionary purchases such as clothing and electronics. Ubos data shows food already accounts for more than 44 percent of average household expenditure. As fuel and utility costs rise, spending on non-essential goods declines sharply, affecting retailers and other small businesses. The rising cost of living is also raising questions about Uganda’s ambition to grow its economy from $50b to $500b by 2040.
Erem believes the target remains achievable but warns that sustained increases in energy and transport costs could slow progress by raising production costs, reducing export competitiveness and discouraging private investment. He also cautions that persistent inflationary pressures could translate into high interest rates, making borrowing more expensive for businesses and households. Nevertheless, he notes Uganda is not facing runaway inflation. ‘The immediate challenge is not broad-based inflation. It is a concentrated cost-of-living shock driven primarily by fuel, transport and selected food items,’ Erem says. Muhumuza agrees, saying for Uganda to achieve it targeted $500b economy, we ‘need economic growth above seven percent, and eventually double-digit growth’.
Regional perspective
Across East Africa, inflation continues to be driven mainly by food and fuel costs, although the pace differs across countries. Uganda’s annual headline inflation stood at 4 percent in July, the lowest in the region, while Rwanda recorded the region’s highest inflation at 12.9 percent in May 2026, driven by transport, housing and healthcare costs. Kenya’s reached 6.5 percent in July, while Tanzania maintained relatively stable prices, with headline inflation easing to about 4 percent.