Sudan pound slips against dollar, Uganda shilling steady

The Ugandan shilling was steady against the dollar on Wednesday, with modest short-term gains seen as Ugandans living abroad send hard currency home for the holidays.

 

On Wednesday, commercial banks quoted the shilling at 2,675/2,685 per dollar, unchanged from Tuesday's close.

 

Faisal Bukenya, head of market making at Barclays Bank, said the shilling would nudge higher on increased dollar inflows in the run-up to the holidays, amid lower importer dollar demand as businesses reduce their activities or close over Christmas.

 

The shilling, which is down 7.3% against the dollar this year, could however come under pressure from the dollar in the new year due to a deteriorating economic outlook.

 

Standard and Poor’s Ratings Services downgraded the east African nation’s outlook to negative from stable on Tuesday, citing donor aid freezes over graft allegations in the prime minister’s office.

 

The country’s budget for 2012/13 (June-July) financial year is expected to fall short by about $260 million or 6.2% as a result of the aid cuts, a senior Treasury official told Reuters on Monday.

 

“The agency’s downgrading of Uganda’s outlook will definitely erode investor confidence in Uganda’s economy and the shilling will suffer in the months to come,” said a trader at a leading commercial bank.

 

Policymakers, who are struggling to return the coffee producer’s economic growth to its long-term potential after soaring inflation last year, cut the policy lending rate by 50 basis points last week to 12%.

 

Across the border, Sudan’s pound slipped to an all-time low against the dollar on the key black market yesterday as buyers worried a deal to restart South Sudan oil exports would be delayed, traders said.

 

The Arab-African country has been mired in an economic crisis since South Sudan seceded in July last year, taking three quarters of the country’s vital oil production with it.

 

Crude exports were the main source of state revenues for Sudan as well as for the dollars it needs to pay for imports like wheat and sugar. The Sudanese pound has more than halved in value since the South split away.

 

On Wednesday, a dollar bought 6.75 Sudanese pounds on the black market, traders said - up from 6.5 pounds earlier this month - as buyers stocked up on the U.S. greenback.

 

“People are buying dollars in the black market at any price,” one trader said, citing fears a deal with landlocked South Sudan on oil fees would not be implemented soon.