By Dorothy Nakaweesi
Kampala — The Shilling has lost ground against the dollar after weeks of stability; a situation experts peg on the effects of the World Bank’s loan suspension to Uganda.
By close of business yesterday at the Bank of Uganda counter, the Shilling was trading in the region of 3,406/3,416. The Shilling last touched this region, three months ago.
The World Bank Group recently withheld new lending to Uganda effective August 22, 2016 while reviewing the country’s portfolio in consultation with the Government of Uganda.
In an interview with Daily Monitor, Mr Fred Muhumuza, an economist and researcher, said: “We cannot rule out this could be the effects of the recent World Bank suspension of its lending to Uganda. This means the money, which we would be expecting to come in, is not trickling in.”
Mr Muhumuza said if this trend continues this month and beyond, it is going to drive inflation up and the cost of living.
“Life is going to become expensive because those who took bank loans will have to spend more Shillings to pay back the loans,” Mr Muhumuza said.
Ms Christine Alupo, the director of communications at Bank of Uganda, attributed the Shilling’s depreciation to corporate demand.
“We are seeing demand pick-up in corporate demand for the dollar, especially from the oil sector. As always, we don’t speculate on the trend and only intervene when there is excessive volatility,” Ms Alupo noted.
Mr Muhumuza concurred with Ms Alupo in explaining the Shilling’s depreciation, saying it is as a result of some corporate companies, which are filing their returns.
Other experts say the trend could be caused by importers who are stocking for the festive season.
However, Mr Everest Kayondo, the chairman Kampala City Traders Association (Kacita), seems to disagree with this notion saying: “The Shilling depreciating does not surprise us if it is happening.”
Backing his statement, Mr Kayondo said currently in Uganda, there is no activity to fetch the country dollars because most local investors are injecting their money into real estates and arcades.
“There is no local content that is bringing in dollars. We are now depending on the little money coming from Ugandans living and working in the diaspora,” he said.
Regional status
Meanwhile, Kenya, one of Uganda’s leading trading partners also experienced the strength of the dollar, which left the Kenyan shilling slightly weakened yesterday.
The Kenyan shilling traded at a mean of KShs101.26 against the dollar, compared to an average of KShs101.21 it traded the previous day.