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Uganda Shilling hits an eight-month low
What you need to know:
- The government is awaiting $200m from the Eastern and Southern African Trade and Development Bank (PTA Bank) that is meant to be brought in to stabilise the Shilling.
- According to the Ministry of Finance, the loan is expected to reduce the need for government to source dollars in the market and therefore increasing the demand.
Kampala – The Uganda Shilling has continued its weakening position since the start of October 2016 as import pressures rise. The official Bank of Uganda (BoU) rate had it trading at Shs3488/3499, shy of the Shs3500 mark. The last time the Shilling was this low was about eight months ago.
“The Shilling wavered, traded in volatile mode undermined by a surge in corporate and interbank demand amidst reduced in foreign exchange inflows,” says Mr. Stephen Kaboyo, the Managing Partner at Alpha Capital Partners.
The Shilling had gained some stability at the start of 2016 after the record lows experienced in 2015 due to pre-election jitters, projected government spending and slowed investment. The gains made since January 2016 are, however, being eroded as end-of year demand is expected to rise.
“In the coming weeks, the Shilling is likely to remain bearish on account of ramped up demand as market players source dollars for end of year imports,” Kaboyo adds.
The coffee export earnings had eased on the pressure slightly at the end of October, however ,the import appetite rises faster as the year comes to a close. Imports are expected as the Christmas season tends to attract demand for imported.
The demand is mostly being driven by commercial banks that are doing conversions for importers from the Shilling to dollars. The various forex bureaus in town were already quoting the Dollar at Shs3507/3510.
By midday on Friday, the BoU had not intervened in the market to stem the volatility.
The government is awaiting $200m from the Eastern and Southern African Trade and Development Bank (PTA Bank) that is meant to be brought in to stabilise the Shilling. According to the Ministry of Finance, the loan is expected to reduce the need for government to source dollars in the market and therefore increasing the demand.
The expectation is that if the loan money is disbursed to Uganda, the Shilling is likely to appreciate.
