Ugandan Shilling on free fall

August 4, 2022

For more than a week, the Bank of Uganda maintained shilling short of touching the 3,900 level against the dollar, through sustained intervention into the market by selling or buying to rule out excess liquidity

Coming under domestic and international pressures, the Ugandan Shilling continued to depreciate against the US Dollar.

For more than a week, the Bank of Uganda maintained the shilling short of touching the 3,900 level against the dollar, through sustained intervention into the market by selling or buying to rule out excess liquidity.

At the beginning of this week, the shilling opened at 3,865 shillings, against 3,715 at the beginning of July. The sharp drop marked one of the fastest rates of depreciation in recent years, according to official sources. The continued fall in the value of the shilling was attributed to higher demand by offshore investors and demand by oil importers, according to financial experts. Ballooning costs of imports like fuel, cooking oil and steel, as well as transport and other services, impacted consumer imports.

The Head of Trading Absa Bank Uganda, Catherine Kijjagulwe said that the shilling is likely to continue within the 3800-3900 trading range for some time. The sustained depreciation of the shilling will continue to be a big challenge for the Ugandan economy according to economists.

Uganda earns foreign exchange largely through donor funds, tourism and migrant workers’ remittances, coffee, and gold exports. Except for coffee exports that have surged from 560 million dollars in 2020/2021 to 862 million dollars in 2021/22, the revenue from others has not picked up. Gold exports which had a turnover of 1.8 billion dollars a year, had to be suspended a year ago over taxation disputes with the government. Tourism, another significant foreign exchange earner is also yet to recover to its previous levels.