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Gov’t Reveals Why Uganda Shilling Will Weaken Further

The government of Uganda has disclosed why the Uganda Shilling will weaken further in the medium term.

This is contained in the background to the budget for Financial Year 2017/18.

“Over the medium term, the Shilling is expected to continue weakening on account of global financial conditions, weak current account position and increased Government foreign exchange requirements to finance infrastructure development,” government reveals in background to the budget.

The Uganda Shilling weakened further against the US Dollar in FY 2016/17, depreciating by 7.4 per cent to Shs3, 618.70 per US dollar in April 2017 from Shs3, 367.99 per US

Dollar in June 2016.

Government says the depreciation of the Shilling was generally attributed to strengthening of the

US Dollar due to interest rates hikes in the USA and increased demand from Oil, manufacturing and telecom sectors.

“In the first ten months of FY 2016/17, the Bank of Uganda purchased USD 728.25 million for reserve build-up. However, US$ 147.33 million was sold as targeted sales to particular companies and a further US$ 10.15 million in intervention sales to stem volatility in the market,” government says, adding that the total net BoU actions in the Interbank Foreign Exchange Market (IFEM) amounted to a US$ 583.47 million purchase.

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