Uganda Shilling records weakest stand this year
In Summary
Depreciation attributed to the recently presented national Budget
Kampala.
The Uganda Shilling opened the week at its weakest standing since the
beginning of the year with experts predicting a further depreciation.
At the opening of business yesterday, the local unit was trading in
the range of 2614/2624 against the US dollar, up from the 2605/2615 it
traded on Monday.
The depreciation for the last one month has seen the Shilling lose
ground by more than 3 per cent from 2530/2540 it traded around the
same time in May to the current 2614/2624.
Although some have attributed Shilling's decline to the recent United
States aid suspension to Uganda, Bank of Uganda (BoU) director
research Adam Mugume has said: "The weakness is associated with the
anxiety associated with the recently presented 2014/15 Budget."
He adds that other reason behind the depreciation is that inflows are
depressing normally at this time of the year; this will not warrant
BoU to intervene.
Winners and losers
Dr Thomas Bwire, an economist with BoU, says for a country which is
largely import based, a scenario like this leaves the cost of doing
business very high especially for importers who are now spending more
shillings to buy the dollars.
"The depreciation is also not good news for foreign investors who are
working in Uganda. When converting their returns into dollars, they
will be making losses," Dr Bwire shares.
Mr Gideon Badagawa, the executive director Private Sector Foundation
Uganda, said the export sector would be gaining from this situation
but it is not growing as expected.
"Government has introduced taxes on agriculture which is the country's
competitive advantage to grow exports, thus farmers will invest less,
leading to fewer jobs and less production so everyone is losing," he
said.
future outlook
Standard Chartered Bank head of financial markets James Mutuku is
optimistic that as companies file their corporate tax payments, this
will give the local unit support. "While continued interbank demand
should balance that out, the expected range for this week is
2575-2625," he said.
dnakaweesi@ug.nationmedia.com
http://www.monitor.co.ug/Business/Uganda-Shilling-records-weakest-stand-this-year/-/688322/2360630/-/119feb6z/-/index.html
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