3 December 2012

Uganda: KACITA Not Bothered About Shilling Depreciation

The members of the Kampala City Traders Association (KACITA) have not felt the impact of the depreciating shilling, which traded at Sh2700 per US dollar last week.

At the height of the high inflationary pressures last year, which touched over 30%, the highest since 1993-pressured by the depreciating shilling, KACITA traders threatened to strike arguing that the cost of doing business was pushing them out of business.

"The effect of the depreciation is being felt but it is not yet alarming," Issa Sekito, the Association's spokesperson told The Independent in a telephone interview, adding that traders may not easily hike the prices of goods during the festive season since most of them stocked enough for the season.

Sekito added "I am an importer and so that is what is on the ground." He said there is hope that the shilling will pick up once remittances from abroad are recorded in the country when holiday makers jet in.

Denis Mashanyu, a forex trader at Standard Chartered Bank told The Independent on Nov. 28 that they expected the shilling to depreciate further and the reasons were clear-growing current account deficit, easing of interest rates by the central bank and portfolio shifts to other regions in Africa.

Christine Alupo, the acting Bank of Uganda director for communications said, the central bank intervened and sold $60million over the last two weeks to stem the pace of the depreciation.

Analysts are worried that if the shilling continues to depreciate, it will increase the price of imported goods for Christmas shoppers on top of contributing to the increase in the country's year-on-year inflation. The rate of inflation was recorded at 4.9% in November up from 4.5% a month earlier caused by the increase in prices of some food items.

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