Monday, January 20, 2003
Uganda Shilling Weakens
By W. WAKABI
THE EASTAFRICAN -NAIROBI-KENYA
THE UGANDA shilling appears headed for further depreciation in the first quarter of this year as officials blame the current slide on low foreign exchange inflows from coffee and the high demand for the dollar on account of increased international oil prices.
Traditionally, inflows from coffee exports are high during this time of the year as farmers offload the crop on the market to finance the festive season and soon after to send children back to school.
Last week, the shilling opened weaker, trading at Ush1,875 to the dollar, down from Ush1,832 in November, or a more than 10 per cent depreciation.
The Bank of Uganda figures show that between November and December, the shilling depreciated by 0.7 per cent � the sharpest decline by the shilling against the dollar in such a short time in the current financial year. While the slide continued into a third consecutive month, central bank officials said in their December report that the "exchange rate was rather smooth and did not warrant any intervention."
For three years now, the shilling has been depreciating against major international currencies.
The Bank of Uganda has consistently blamed this on low revenue from coffee exports. The price of the commodity has been low over the past two years, seriously affecting earnings.
In December 2001, the shilling slid to Ush1,750 to the dollar and was saved from further battering by a $25 million intervention package by the central bank. The intervention stabilised the exchange rate at Ush1,733 in January last year.
Uganda's total coffee exports for last month amounted to $11.3 million, having managed a mere 18 per cent increase compared with the previous month.
During the same period, however, gross foreign exchange purchases grew to $158 million up from $135 million in November, owing to what the Central Bank described as "seasonal factors." According to analysts, this market situation inevitably exerted pressure on the supply side, resulting in rapid depreciation.
Officials said that during December and January, the demand for the dollar rose sharply as traders imported goods ahead of Christmas and New Year and holidaymakers bought more goods.
Comments\Views about this article
Do you Yahoo!?
Yahoo! Mail Plus - Powerful. Affordable. Sign up now
