East African Business Week (Kampala)
Albert Ahabwe
26 October 2009
The Uganda Shilling has this week continued its latest remarkable rise against the US Dollar.
The Shilling last week traded at 1875/1890, a high it had last reached in October last year. According to forex dealers, the shilling has firmed up against the dollar as a result of the Bank of Uganda's (BoU) efforts to resuscitate the local unit after it suffered major hits during the turmoil caused by the global economic meltdown earlier this year.
"With the western economies recovering from the recession, off-shore investors have re-invested in government securities and increased remittances into the economy," Mr. Luigi Cordeiro de Souza, the head of treasury at Crane Bank said.
The recovery of the western economies mainly increases the remittances which had gone down by huge percentages especially in the first and second quarters of the year.
The local unit had earlier this year hit a record low, trading at Ush2,300 against the dollar at the peak of the recession in the month of May. This came as offshore investors exited the market as the effects of the recession were taking root. The shilling slide which had began in the fourth quarter of last year hit harder as investors ventured into dollar purchases after they were forced to liquidate their holdings in government securities as the global downturn caused a major credit freeze.
At the height of this crisis at the beginning of this year, BoU revealed that over $300 million had been repatriated from the market at the peak of the recession. The Central bank is set to announce a new offer of another $55 million in government securities which is expected to further strengthen the shilling.
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