CSOs call for gov't action on depreciating shilling

By Francis Emorut                                                    

KAMPALA - Civil society actors have expressed concern over the high US dollar-Ugandan shilling exchange rate, saying if the government does not tackle the problem immediately, it will have a negative impact on the implementation of the 2014/2015 financial budget.

The Ugandan shilling has continued to fall against the US dollar in recent years, with the exchange rate – worryingly – currently at sh2990.

Under their umbrella body Civil Society Budget Advocacy Group (CSBAG), the group castigated the government for the ambitious infrastructure development programme as the cause of the local shilling losing ground against the US dollar.

Addressing journalists at the media conference in Kampala on Friday, the national coordinator of CSBAG Julius Nkunda spoke of the fall of the shilling against the dollar.

He pointed to the government's ambitious programmes like the sh1.1bn Karuma Hydro power project dam of 600 Mega Watts and the sh1bn Isimba hydro power dam, arguing that such projects should be done in phases.

“The huge forex requirements by these undertakings in reality or in speculation cannot be sustained by the Uganda forex bureaus,” he said.

“Whereas actual expenditure on the dam projects is getting stronger as they kicked off in the financial year 2014/15, the economy doesn't have enough dollars to implement them without trends like we are witnessing.

“The equipment of the projects are procured in foreign currency (US dollar) and so are the payments to the expatriates employed with these projects.”

The civil society group also criticized government over what they termed as poor regulation of the flow of forex into and outside the country.

Nkunda added: “Uganda is one of the few countries in the world that either does not care or have limit on the amount of forex that can be repatriated, exchanged or held as cash at any one time.

The group also raised concern about the Bank of Uganda's failure to reign on the forex exchange service providers who allow huge amounts of dollars to be repatriated in and out of the country.

They suggested such solutions to mitigate the impact;
 

• The government should follow the sequence method in infrastructure development to limit the impact on the economy,

• the Bank of Uganda (central bank) should prioritize the implementation of the enterprise zoning that was done for the country to maximize productivity.

• The central bank reign on local and international entrepreneurs who unnecessarily strain the shilling against the dollar

• make value-addition a major component of government's projects, and

• the  Bank of Uganda should increase regulation in the country's forex market.
  
   

David Walakira, CSBAG’s policy budget analyst, noted that there is need to control the flow of foreign exchange in and out.

"Everyone leaves and enters the country with any amount of dollars, which is causing the shilling to depreciate highly.”