It raises the cost of supplying goods and services in the Ugandan economy, because many of these goods and services are either directly imported or are produced locally but use imported inputs in their production.
Such a shock will unavoidably raise inflation, although it usually takes up to a year for the full effect of an exchange rate depreciation to be felt on domestic prices. The questions which macroeconomic policy makers must address are: how much additional inflation should be tolerated? And what can be done to curb the rise in inflation?