$USD Versus UgShs: After Jet Fighter Economic Crash (2011), Is It Modern Artillery Recession 2015?
The Uganda shilling hit a record low in the exchange rate against the US dollar this week. It is now increasingly expensive to buy imported goods. Given that our trade deficit is heavier on imports, we are definitely in for inflation (higher local prices). Surprisingly, in their press statement, Bank of Uganda says " We do not target the level or direction of the exchange rate". So what are they doing if anything? More worryingly, the Central Bank Governor recently said:" It is not sustainable for the Bank of Uganda to try and prop up the exchange rate. We would simply deplete our foreign reserves if we did so." So that explains it. Is it not the Central Bank withholding US dollars from the market that has brought about this constant rise in the dollar rate against the shilling? If the Central Bank itself prefers the dollar and abandons its own kid (the Uganda shilling), how can we expect a healthy local currency? They might actually have already depleted Uganda's dollar reserves in some major international expenditures. Remember last elections (2011) when the economy crashed because of the heavy classified dollar expenditure on Russian fighter jets among other reasons? Does it surprise anyone that we are now hearing about a request for trillions of shillings for "Modern Artillery"? Isn't that where the dollar reserves have gone? Did they secretly spend foreign currency reserves on the military purchases, then they now ask parliament to sign for the money retro-actively (from some international loan shark bank?). That's what they did last time with the Russian jets didn't they? I constantly worry about Bank Of Uganda which is mandated to regulate, protect and expand the economy. How do they ever achieve their economic parenting role if they seem unprepared to act rationally on major government dollar expenditures? They actually need to start stocking up on gold reserves to back up the shilling rather than let all our minerals be exported. But the government has little or no mining capacity and is more interested in a privatized economy where any extra money they earn is from the taxes they increase. Their remaining meagre option is to constantly buy back more shillings from the market in exchange for ANY foreign currency in stock. That's like a patient permanently on chloroquine Intra-Veinous drips whether at work or dancing at a Jose Chameleon concert.
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