Mutebile warns forex speculators
Jun 16, 2011
THE Central Bank has warned forex speculators of stern action following dollar outflows of $30m (sh72b), which pushed the shilling to record lows on Wednesday.
THE Central Bank has warned forex speculators of stern action following dollar outflows of $30m (sh72b), which pushed the shilling to record lows on Wednesday.
This came after the governor was quoted in Britain’s Financial Times newspaper on Tuesday, as saying he had disagreed with the President over withdrawing $400m (sh960b) from the country’s foreign reserves to purchase Russian-made fighter jets.
The Government plans to spend $740m (sh1.8 trillion) on the jet fighters.
The paper claimed Mutebile has opposed it, saying it would reduce reserves from six to four months of import cover. The paper also reported that Mutebile was against what they called ‘President Museveni’s erratic policies and the Government’s fiscal indiscipline’ that had led to higher inflation and declining foreign reserves.
The Financial Times claimed that Mutebile said the disagreement between him and the President was due to many factors, including a planned $2.2b hydro-power plant at Karuma, which the government says it will build with or without external funding and alleged tax exemptions to regime cronies.
However, the governor told reporters at the Bank of Uganda yesterday, that his comments were used out of context, adding that no money had disappeared from the Central Bank’s coffers.
“Because of my comments, there was excessive pressure on the foreign exchange market and we had an outflow of $30m on Wednesday. This was much higher than the usual flows. To counter this speculation, we intervened and sold $20m, allowing the market to normalise,â€
Mutebile said yesterday.
Mutebile warned speculators that the bank would not hesitate to “burn their fingers†by using the country’s reserves to intervene in the foreign exchange market whenever need arises.
“The money has not disappeared, so speculators be ware because we will not hesitate to tame you “since we have adequate
reserves to fight speculation.â€
The Ugandan shilling slid to a record low on Wednesday, rattled by reported criticism of the President by the Central
Bank governor over the use of hard currency reserves. The currency was further undermined by dollar demand from the oil sector.
“There was excessive pressure on the foreign exchange market and we had an outflow of $30m,†Mutebile told a news conference yesterday. This was much higher than usual flows and to counter this speculation we intervened and sold $20m to normalise the market.â€
The shilling was trading at 2,422/2,425 against the dollar, lower than 2,428/2,433 touched on Wednesday.
On Tuesday, the local currency at 2,403/2,408 against the greenback, marginally weaker than Friday’s close of 2,401/2,406 and matching Friday’s low, which was the shilling’s weakest level against the dollar since it was traded for 2,410 on March 23.
This came after the governor was quoted in Britain’s Financial Times newspaper on Tuesday, as saying he had disagreed with the President over withdrawing $400m (sh960b) from the country’s foreign reserves to purchase Russian-made fighter jets.
The Government plans to spend $740m (sh1.8 trillion) on the jet fighters.
The paper claimed Mutebile has opposed it, saying it would reduce reserves from six to four months of import cover. The paper also reported that Mutebile was against what they called ‘President Museveni’s erratic policies and the Government’s fiscal indiscipline’ that had led to higher inflation and declining foreign reserves.
The Financial Times claimed that Mutebile said the disagreement between him and the President was due to many factors, including a planned $2.2b hydro-power plant at Karuma, which the government says it will build with or without external funding and alleged tax exemptions to regime cronies.
However, the governor told reporters at the Bank of Uganda yesterday, that his comments were used out of context, adding that no money had disappeared from the Central Bank’s coffers.
“Because of my comments, there was excessive pressure on the foreign exchange market and we had an outflow of $30m on Wednesday. This was much higher than the usual flows. To counter this speculation, we intervened and sold $20m, allowing the market to normalise,â€
Mutebile said yesterday.
Mutebile warned speculators that the bank would not hesitate to “burn their fingers†by using the country’s reserves to intervene in the foreign exchange market whenever need arises.
“The money has not disappeared, so speculators be ware because we will not hesitate to tame you “since we have adequate
reserves to fight speculation.â€
The Ugandan shilling slid to a record low on Wednesday, rattled by reported criticism of the President by the Central
Bank governor over the use of hard currency reserves. The currency was further undermined by dollar demand from the oil sector.
“There was excessive pressure on the foreign exchange market and we had an outflow of $30m,†Mutebile told a news conference yesterday. This was much higher than usual flows and to counter this speculation we intervened and sold $20m to normalise the market.â€
The shilling was trading at 2,422/2,425 against the dollar, lower than 2,428/2,433 touched on Wednesday.
On Tuesday, the local currency at 2,403/2,408 against the greenback, marginally weaker than Friday’s close of 2,401/2,406 and matching Friday’s low, which was the shilling’s weakest level against the dollar since it was traded for 2,410 on March 23.