Deficit hits sh5 trillion, shilling to slide by 4%

By Samuel Sanya

Uganda’s current account deficit has reached $1.8b (sh5.2 trillion) or 6.6% of the country’s total economic production despite the total value of exports of goods and services growing by $300m to $5.3b, a Ministry of Finance report said.

Experts say there is cause for concern.

Uganda’s imports of $7.8b during the current financial year have outstripped exports by $2.5b (sh7.3 trillion) contributing to a scarcity of hard currency and exerting pressure on the exchange rate.

The shilling was trading at 2,891/2,900 against the dollar on Thursday.

Uganda’s shilling has lost ground since early December 2014 when the exchange rate was sh2, 768 on average, a 10% depreciation from sh2,512 in December 2013.

Documents from the finance ministry indicates that the exchange rate may depreciate by 4.8% in nominal terms from an appreciation of 2.2% in the previous financial year.

The shilling seems to be ready to breach the 3,000 mark as pressure from the oil, trade and manufacturing sectors mounts.

Adam Mugume, the director of research at Bank of Uganda, said the annual depreciation of the shilling is a consequence of a strong dollar and high demand from oil and manufacturing sectors.