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Uganda Sells $20 Million to Stabilize Shilling; Vows to Curb Speculation

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Posted June 16, 2011 by Ugandan Diaspora News Team in Economy ~ 1,969 views

     

By Fred Ojambo | Bloomberg | Uganda’s central bank sold $20 million in the domestic foreign-exchange market yesterday to stabilize the shilling and said it would act again to curb speculation in the domestic currency.

The Bank of Uganda acted after the East African nation recorded an outflow of $30 million because of speculation, Governor Emmanuel Tumusiime-Mutebile told reporters today in Kampala, the capital.

“We shall not hesitate to enter the market to stem speculation,” Tumusiime-Mutebile said. “I have the capacity to burn their fingers.”

Uganda’s shilling has weakened 5.1 percent since the start Jan. 1 to 2,433 against the dollar and is Africa’s fourth-worst performing currency so far this year, after the Kenyan shilling, the Sudanese pound and the Tanzanian shilling, according to Bloomberg data. Inflation in the East African country surged to a 17-year high of 16 percent in May as food and fuel prices increased.

Price growth may slow to 6 percent by the end of this year because “the drivers have started to dissipate,” Tumusiime- Mutebile said.

Uganda is scheduled to become an oil producer next year when Tullow Oil Plc (TLW) is expected to start pumping crude and gas from the Lake Albert Basin. The country has an estimated 2.5 billion barrels of oil, with about 1 billion barrels in proven reserves, according to Tullow.

Proceeds from oil should be saved to invest in infrastructure and agriculture in order to prepare the economy for when the resource is exhausted, Tumusiime-Mutebile said.

Uganda’s economy will expand about 7 percent in the financial year though June 2012, up from 6.3 percent in the current fiscal year, the central bank forecast in a statement handed to reporters.
To contact the reporter on this story: Fred Ojambo in Kampala at fojambo@bloomberg.net


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Ugandan Diaspora News Team

Ugandan Diaspora News Online is an independent, non political news portal primarily aimed at serving Ugandans who work and reside outside Uganda. Our aim is to be a one stop shop for everything Ugandan and the celebration of our Ugandan heritage.

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