The Independent Uganda: You get the Truth we Pay the Price
SPECIAL FEATURE | THE INDEPENDENT | Quarterly Review of the Performance of Uganda’s Financial Markets, with Catherine Kijjagulwe, Head of Trading at Absa Bank Uganda.
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QUESTION: How did the shilling open 2023?
The currency opened the year trading at the 3715/3725 levels at the beginning of January 2023.
QN: What were the trends in the shilling’s performance throughout the first quarter of the year and which factors drove these trends?
As of 31st March 2023, the currency was trading at the 3770/3780 levels after having briefly touched lows of 3790/3800 during the week. Overall, about a 2% depreciation from the year’s opening levels, driven by a pickup in activity on the demand side as the dividend cycle sets in between March and June. There were also some pockets of demand from offshores who were selling their government securities and purchasing dollars from the proceeds due to the continued global economic uncertainties also triggered by the global banking crisis hence their preference for the safe haven until the fundamentals stabilised. Inflows were healthy from NGOs.
QN: How is the shilling fairing as we end the quarter?
The shilling closed the first quarter on a slightly weak footing driven by some robust activity on the demand side.
QN: How will this affect people and businesses?
Exporters and dollar sellers usually benefit when the shilling is weak because they get more Uganda shillings for their dollar conversions. On the other hand, the importers, manufacturers, and dollar buyers will require more Uganda shillings for their dollar purchases, which increases their cost of doing business and negates some of their profits and also filters into the end price for the consumers of the goods and services.
QN: How do you project the shilling will perform in the coming months?
The shilling is anticipated to buoy within the 3650-3850 trading range in the short term. We should continue to see some pockets of demand during the dividend cycle, and flows should continue from NGOs, commodity exporters and offshores.
QN: Were there any regulatory or monetary policy developments registered this quarter? If any, which are they and what are their implications?
The Monetary Policy Committee meeting held its meeting on 6th February 2023 and the Central Bank Rate was maintained at 10%, citing uncertainties due to the global economic outlook. The next Monetary Policy Committee meeting is tentatively scheduled for 6th April 2023.
