Over the past few months the Uganda Shilling has persistently depreciated against the Dollar and Pound Sterling, with the Dollar at about 3,300/- and the Pound going for over 5,000/-.
The development has led to an increase in the costs of carrying out both internal and external trade and in the process slackened the growth component projected by government for this fiscal year.
Recently, while presenting the Budget before Parliament, finance minister Matia Kasaija alluded to the fact that the imbalance of imports against the exports had affected the external sector including foreign reserves. He also talked about increased demand for foreign exchange and insecurity faced by some of Uganda’s trading partners in the region and the struggling European markets that were, however, on the recovery path.
However, according to Mr Kasaija, despite the above-mentioned shortcomings, Uganda is registering ‘positive’ economic growth, with the economy expected to grow by 5.3 per cent this financial year.
But in real terms, the opposite seems to be obtaining; more so if one considers the weak Shilling and the effects it can have vis-a-vis the rate of inflation. So, now is the time for the Central Bank to intervene, offering policy alternatives that can help stabilize the Shilling.
That scenario notwithstanding, in order to ensure the wellbeing of all Ugandans, it is important for the government to maintain stable prices for both goods and services. Further, in terms of food production Uganda has a favourable climate and a comparative advantage over most of our neighbours, so the government must also heavily invest in agriculture, with emphasis being put on value-addition if our exports are to meet the quality standards of the net importers like the western countries.
It is the resulting inflows from such investment that will help the country bridge its deficits and consequently improve on our foreign exchange savings.