Business
Domestic debt could affect the shilling — experts
Publish Date: Jun 19, 2014
Domestic debt could affect the shilling — experts
  • mail
  • img
newvision

By Samuel Sanya

The Government plans to borrow sh2.5 trillion from the money markets in the financial year 2014/15, sh800b higher than last year.


Jared Osoro, an economist, notes that this may affect the exchange rate.

“When the fiscal deficit grows faster than the Gross Domestic Product growth, there is a depreciation bias on the shilling. At the moment, it is hard to differentiate between fiscal and monetary policy in Uganda as both are pulling in the same direction,’’ he noted.

“A very accommodative monetary policy may boost economic growth, but fail to anchor inflation,” Osoro added, while speaking at the Deloitte past budget breakfast at the Sheraton Hotel recently.

The exchange rate was relatively stable in 2013/14, with a marginal appreciation of the shilling by about 2% against the US dollar on the back of strong foreign direct investment.

Maria Kiwanuka, the finance minister, explained in the budget speech that the net domestic financing in 2014/15 will include a draw down of the energy fund to finance the Karuma and Isimba hydropower projects.

The Government borrowed sh1.75 trillion to supplement domestic revenues for the infrastructure investment projects, especially roads, in 2013/14, some sh750b higher than had originally been budgeted.

Osoro said government’s expenditure on infrastructure and investment has a multiplier effect on Uganda’s economic growth.

“Government has planned projects worth $40b (sh100 trillion), but they have not outlined a clear funding mechanism so as to assess Uganda’s debt sustainability,” he added.

Adam Mugume, the Bank of Uganda executive director for research, noted at separate event that the sh750b extra borrowing by government affected private sector activity last financial year.

RELATED ARTICLES

Shilling up ahead of debt auction results

Ugandan shilling eases as banks buy dollars

Shilling stable, seen bearish on corporate demand

The statements, comments, or opinions expressed through the use of New Vision Online are those of their respective authors, who are solely responsible for them, and do not necessarily represent the views held by the staff and management of New Vision Online.

New Vision Online reserves the right to moderate, publish or delete a post without warning or consultation with the author.Find out why we moderate comments. For any questions please contact digital@newvision.co.ug

  • mail
  • img
blog comments powered by Disqus
Also In This Section
Cleaner low sulphur fuel diesel on market
Effective February 2, 2015, low Sulphur fuel diesel with 50 parts per million (ppm) sulphur content will be on market....
Electricity tribunal hits snag over absence of energy ministry PS
Hearing at the electricity disputes tribunal in the row between Umeme and ERA hits a snag over the absence of Energy ministry PS Kaliisa Kabagambe....
Honda investigating possible exploding airbag death
Honda is probing a deadly crash in the United States possibly linked to exploding air bags blamed for killing at least five people....
Contradictions cloud pensions liberalization
MAJOR contradictions still exist among the major backers of the impending liberalized pensions sector on which to adapt with the liberalization bill expected on the floor of parliament...
Gov
IN efforts to expand market for Uganda's agricultural produce, Government has embarked on wooing more investors in agro-processing to set up investments...
Stanbic Bank signs debut $85m  loan
Stanbic Bank Uganda (SBU) has signed an $85 million, 18-month loan to fund its general business activities, the first time it has borrowed from international loan markets, the main arranger of the facility said...
Do you agree with the new tax on private schools?
Yes
No
Can't Say
follow us
subscribe to our news letter