Uganda: Shilling to Remain Under Pressure - Says Absa

5 September 2019

The shilling is expected to remain under pressure with a likelihood of shedding some of its value against the dollar, according to Absa.

The unit, according to Mr Jeff Gable, the Absa chief economist for Africa, will depreciate from its current hold of Shs3,680 to about Shs3,775 due to the widening gap between exports and imports.

Speaking on the sidelines of the World Economic Forum on Africa in Cape Town, South Africa, Mr Gable said the shilling had been largely stable depreciating by a small margin against the dollar, noting that the unit is expected to lose some value due to a weak current account deficit.

The unit, he said, will trade in the range of Shs3,750 and Shs3,750 before the end of this year.

The shilling has been less volatile than other currencies in the region because of increased foreign direct investment and earnings from soft trade such as tourism.

Saved the shilling

"There are few foreigners owning Uganda's debt (T Bills and Bonds), which has saved the shilling from frequent volatility in the foreign exchange market," he said but noted the current global economic environment has been shaky and is likely to affect trade, which in turn will lead to slower demand for exports.

At the close of last month, Bank of Uganda said the current account deficit had widened during the 19/20 financial year rising to $ 3.6m (11.4 per cent of gross domestic product).

This, the Central Bank said, was largely due to high private sector imports, rise in the services deficit and increase in income payments to foreign investors, among others.

Mr Gable also highlighted an accommodative and supportive monetary policy stance, which he said had helped the growth and recovery in the private sector credit growth.

"Economic growth has been consistence in the past few years, we believe that the economy will continue growing in the same range. It has been growing in the range of 5.8 per cent to 6 per cent," he said.

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