EAST AFRICAN CURRENCIES KEEP SLIDING
The three main East African currencies, the Kenya Shilling, the Tanzania Shilling and the Uganda Shilling are all trading in record low territory now to the dismay of the business community and local consumers but the delight of foreign visitors, who get substantially more for their Dollars, Euros and Pounds than a month ago. Rwanda is a notable exception from this trio as usual little data if any are available from the EACs fifth member Burundi since The Land of a Thousand Hills has also defied the trend of double digit inflation so far which has hit the founder trio of the EAC.
Kenyas shilling is progressively advancing towards the 110 versus one US Dollar margin which has been suggested three weeks ago by financial analysts while the Uganda Shilling is steadily creeping towards the intermediate 2.900 mark versus the greenback, eventually feared to reach the dreaded 3.000 while in Tanzania the currency has descended deep into the 1.700 range with further outlooks equally grim.
Speculation is thought to be one of the key factors in these developments though some of the underlying factors like inflation, trade imbalances and excessive government spending, in particular in Uganda, have ran down foreign currency reserves to levels which makes the Central Bank chiefs more than just a little nervous. The added insurance levies heaped on imports and exports by the threat of ocean terrorists from Somalia too has cost the East African economies dearly and the threat of conflict spreading from Somalia across the border, recent abductions of foreigners by militias are a case in point, is further clouding the outlook for tourism and impacting on the economy as a whole.
In Kenya the constitutionally necessitated formation of new bodies is considered a huge drain on an already stretched economy, besides the income of parliamentarians said to be amongst the highest in the world, and elections looming next year does not help either to restore market confidence on the quick. In Uganda the creation of ever more districts has caused government budgets to strain at the seams and spats between Bank of Uganda chief Prof. Tumusime Mutebile and the powers that be have not helped either to calm the markets down nor inject some positive perceptions about the immediate future in the Pearl of Africa. In fact, latest developments touching on the nascent oil sector have cast grave doubts over the anticipated production start as parliament is now formally investigating alleged corrupt practices which could throw the sector into turmoil for a while.
Economic prospects overall for a united East Africa are generally thought brighter than the presently looming clouds would suggest but this integration is neither absolutely certain, in view of the brakes being applied by one memberstate on fast tracking crucial issues like freedom of movement of people and cross border investments non tariff barriers playing a major role nor is there a reliable time frame available right now. Yet, tourism, one of the regions economic locomotives, is one of the sectors bedeviled by NTBs and generation old sentiments, with key borders between the Masai Mara and the Serengeti remaining closed over economic fears rather than environmental concerns as it being publicly professed, while safari airlines cannot fly their clients straight into a national park across the borders, with the exception of Uganda which has designated several fields as gazette entry and exit points several years ago already in preparation of greater integration. Precision Air, arguably the most successful airline in Tanzania and number three in the wider region behind Ethiopian and Kenya Airways, has often been portrayed by such backward forces in Tanzania as foreign, i.e. Kenyan though not true in fact as 51 percent of the shares are held by a local citizen. Here a crucial taxi way was not built in timely fashion by Tanzania Airport Authority to connect a multi million US Dollar investment in a maintenance hangar at JNIA in Dar and their IPO suffered multiple delays right up to the launch date last Friday, when several commercial banks inexplicably received the IPO application forms too late in the day.
Instead of pooling resources and standing united, these divisions, amongst many more, are one of the causes for the lackluster economic performance and are aiding the slide of the national currencies. While a plan exists to introduce an arguably stronger common East African Shilling in due course, this is a long way off and the prospect alone of a common currency does not help at present to stem the onrush of the devaluation tide. And as the saying here goes, watch this space for more updates and fresh thoughts.
