Kampala. East African currencies, including the Ugandan and Tanzanian shillings as well as the Rwanda franc have taken a beating as they continue to weaken against the dollar.
The Ugandan shilling has edged downwards by 3.6 per cent against the dollar since January while the Tanzanian shilling has edged by 1.8 per cent. The Rwanda franc has been a bit resistant only weakening by 0.9 per cent.
The Uganda shilling has been the worst hit closing last Thursday at Shs3,824 against the dollar, according to Bank of Uganda.
The weakening trends present a tricky situation for the region, which has been recovering from a difficult period characterised by a rapid increase in imports, relatively violent elections and slowed economic growth.
This has not been helped by stagnated or reduced growth in the exports sector.
The Uganda shilling, according to Mr Stephen Kaboyo, the Alpha Capital managing partner, has been undermined by surging dollar demand amid low forex inflows.
“Bank of Uganda’s intervention [last week] provided a short period of relief,” he said, highlighting the likelihood of continued weakening of the Uganda shilling in the weeks ahead.
“Outlook indicates sustained weakening in the coming days on account of intense demand from importers and commercial banks,” he said.
The Central Bank, Mr Kaboyo said, had last week only sold Shs101b worth of dollars against the targeted Shs180b after the unit lost almost Shs50 of its value in just three days.
Earlier, Bank of Uganda had said it would not intervene in the market.
However, the continued weakening, according to Mr Louis Kasekende, the Bank of Uganda deputy governor had presented a serious threat to the economy thus forcing the Central Bank to intervene.
Mr Kaboyo said that although the Kenya shilling had maintained a relatively firm outlook, it risks depreciation pressures that are mainly expected to build from importers.
Under pressure: According to the Commercial Bank of Africa, while the Kenya shilling remains well supported by diaspora dollar inflows and the robust Central Bank of Kenya forex reserves, the Uganda shilling has been under pressure from high demand for dollars by the private sector, energy and commercial banks. The Tanzanian unit has been hit by low inflows and high demand for dollars in the mining sector.