Analysts report a positive year-end for the Uganda Shilling, standing firm against the US Dollar and surpassing its East African counterparts.
Over the past month, its value ranged between 3,767 and 3,815 to the Dollar, with the Bank of Uganda quoting a midday rate of 3,803 on Monday.
The Shilling’s steady rise against the Dollar throughout last year hit a snag when the World Bank announced a freeze on new loans to Uganda over human rights concerns, impacting the exchange rate significantly.
Deputy Governor for Bank of Uganda (BoU) Michael Atingi-Ego highlighted, “The World Bank’s stance on new financing due to the Anti-Homosexuality Act saw a depreciation from 3650 to nearly 3750 in just two days.”
However, the nation navigated this setback, with the Shilling maintaining stability despite recent depreciation pressures in the quarter leading to November 2023.
Factors contributing to depreciation included heightened corporate demand, primarily from oil, telecommunications, and manufacturing sectors, along with continued outflow of portfolio capital.
In contrast, neighboring currencies in the East African Community faced more substantial losses against the Dollar, particularly the Rwandan Franc and Kenyan Shilling, depreciating by 4.6% and 5.4% respectively in the quarter leading to November 2023.
These currencies struggled due to persistent effects of the COVID-19 pandemic and unique economic challenges.
The Kenyan Shilling faced compounded issues, including investor withdrawals preceeding the 2022 presidential elections, resulting in a staggering 34% loss against the Dollar compared to Uganda’s mere 3% decrease.
Thankfully, recent data from the Central Bank of Kenya indicates a slowdown in the Shilling’s depreciation rate, offering hope as demand for the Dollar decreases amidst increased supply. The Shilling currently stabilizes between 150-160 against the Dollar.
Similarly, the Tanzanian Shilling saw a decline of 4.8% against the Dollar in the quarter leading to November 2023, a stark increase compared to its previous loss rate.
The Uganda Shilling’s resilience was evident in its performance against a basket of trading partners’ currencies, maintaining stability in real effective terms.
Although facing challenges, Uganda’s currency remained relatively strong, backed by a fall in import prices, showcasing promising economic stability amid regional fluctuations.
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