Uganda’s economy now valued at US $25 b

shilling

Uganda’s economy is now valued at 75 trillion Shillings about US $ 25 billion dollars. Finance Minister Matia Kasaija disclosed this while reading the 2015/16 national budget in Kampala.

According to the minister, Uganda’s Gross Domestic Product – the sum total of the country’s goods and services in a year – standing at 75 trillion Shillings is suggestive of a sound economic footing.

Kasaija said although the trade deficit is widening and inflationary pressures exist, the country’s forex reserve is healthy at 2.9 trillion Shillings equivalent to four months of imports of goods and services.

He said in order to reduce the trade deficit, the government is embarking on export enhancement and diversification and value addition of agricultural products especially coffee and cotton.

On the depreciating Shilling, Kasaija said the Bank of Uganda will continue intervening to smooth up the pressures.   In his comments, President Yoweri Museveni said the depreciating Shilling has pushed the GDP to 77 trillion Shillings, adding that if exports were enhanced they would have strengthened the economy even further.

For almost three weeks now the Shilling continued to trade weak against the Dollar, hovering above 3,100 on the sell side, just about 150 Shillings less than the value of the Euro against the local currency.

A number of forex bureaus are already quoting figures nearing 3,200 mark with each passing day closing on a higher figure.   Stephen Kaboyo of Alpha Capital Partners, which has consistently monitored the free-falling Shilling, says the prevailing situation suggests that the Dollar will continue to edge higher in the currency markets, eventually paring with the Euro.

He says there is growing belief that the Bank of Uganda may further increase its inflation forecasts and markets are keeping a closer look on forward guidance.

Kaboyo says the falling Shilling will continue to put upward pressure on inflation and therefore a weaker Shilling will add to the need to tighten monetary policy going forward.

James Mutuku, the Head of Financial Markets at Standard Chartered Bank, says there is increased dollar-demand especially from the manufacturing and telecommunication sub-sectors.

According to Mutuku, demand from companies repatriating dividends to offshore investors could have further contributed to the Shilling depreciation. He, however, believes the Shilling will hold at the current levels in the coming week with 3100 being a key resistance level.