ECONOMIC WOES GROW
The Uganda Shilling yesterday hit a record low when it broke through the psychologically important threshold of 2.400 versus one US Dollar, sending jitters through the local currency market and adding to fears that the country has to brace herself for more price rises in coming weeks, as fuel and all other imported goods will cost a lot more again.
The Bank of Uganda is thought to have tried to boost the value of the shilling, by conventional economic wisdom undervalued now by as much as 10 to 15 percent, by injection of an estimated combined 200+ million US Dollars from their reserves into the market, but like a drop of water on a hot stone the effects were short lived and literally evaporated within days, at times hours after the intervention.
Inflow of foreign capital and major aid packages has been slow in recent months, some say because of the elections while others point to the failure of government to act on CHOGM corruption, which has prompted a number of donor countries to withhold or scale back financial support.
News before the elections that the ministry of finance had run short of money too added to the capital flight, as international companies with branches in Uganda were busy scooping up the dollars to pay dividends and loan repayment instalments to their ‘mother companies overseas’ with some saying that even the Bank of Uganda’s own financial instruments, for long valuable and internationally sought after investments, had been sold off.
As already previously mentioned, the effects of a sliding shilling value has driven up fuel prices across the country and inflation has started to accelerate once again to levels not seen over much of the 15 years, prompting yet more concern over the economic outlook under the storm cloud of inflation.
Watch this space.