Reduced aid inflows dent trade account
May 27, 2011
THE falling volumes of aid, coupled with a surge in imports, have left a dent in the trade account, resulting into a weaker shilling, the Bank of Uganda has said.
By Samuel Sanya
THE falling volumes of aid, coupled with a surge in imports, have left a dent in the trade account, resulting into a weaker shilling, the Bank of Uganda has said.
“As at the end of April, the total budget support and project aid receipts for the financial year 2010/11 amounted to $596.82m (about sh1.4trillion) compared to $775.04m in the same period in 2009/10,†Bank of Uganda said in a monthly report.
The report highlighted that total export earnings grew by 4.76% in March on the back of better coffee exports, which were offset by a 39.7% increase in total imports in the same month, pushing the shilling/dollar exchange rate closer to the sh2,400-mark.
Adam Mugume, the director for research at the Bank of Uganda, told a monthly press briefing that the decrease in foreign aid was largely due to the financial woes in the euro- zone and an increase in aid recipients in Africa.
“The donors now have their own problems and there are also many more countries asking for aid.
“We now have to increase productivity and trade operations to close the gap in the current account,†he explained recently.
Mugume pointed out that the current exchange rate was a reflection of the country’s actual current account position without the influence of foreign aid which would at times cause perceived trade surpluses even when foreign aid is not an element of trade.
“The exchange rate should have been here for many years but we have just been misled by foreign aid,
“Going forward, expenditure in the next financial year is going to be tight to correct the situation,†he pointed out.
THE falling volumes of aid, coupled with a surge in imports, have left a dent in the trade account, resulting into a weaker shilling, the Bank of Uganda has said.
“As at the end of April, the total budget support and project aid receipts for the financial year 2010/11 amounted to $596.82m (about sh1.4trillion) compared to $775.04m in the same period in 2009/10,†Bank of Uganda said in a monthly report.
The report highlighted that total export earnings grew by 4.76% in March on the back of better coffee exports, which were offset by a 39.7% increase in total imports in the same month, pushing the shilling/dollar exchange rate closer to the sh2,400-mark.
Adam Mugume, the director for research at the Bank of Uganda, told a monthly press briefing that the decrease in foreign aid was largely due to the financial woes in the euro- zone and an increase in aid recipients in Africa.
“The donors now have their own problems and there are also many more countries asking for aid.
“We now have to increase productivity and trade operations to close the gap in the current account,†he explained recently.
Mugume pointed out that the current exchange rate was a reflection of the country’s actual current account position without the influence of foreign aid which would at times cause perceived trade surpluses even when foreign aid is not an element of trade.
“The exchange rate should have been here for many years but we have just been misled by foreign aid,
“Going forward, expenditure in the next financial year is going to be tight to correct the situation,†he pointed out.