May 6, 2015

Shilling Remains Under Pressure as Inflation Raises to 3.6%

The Uganda Shilling last week traded in the range of 2980 and 3020 driven by inflows from portfolio investors while demand from the telecom, manufacturing and energy sectors remained high.

A trader displays Uganda Shilling notes. IMF says there is likelihood of exchange rate depreciation as has already been observed in South Africa, Nigeria, Ghana and Zambia.
A trader displays Uganda Shilling notes. IMF says there is likelihood of exchange rate depreciation as has already been observed in South Africa, Nigeria, Ghana and Zambia.

According to James Mutuku, the Head of Financial Markets at Standard Chartered Bank, this trend “is expected to remain in the same range during next week’s (this week) trading.”

Meanwhile, Uganda’s inflation rose to 3.6% in April, up from1.9% in March, 2015 driven by shilling depreciation and a reduction in food supply. This is the highest inflation rate in nine months and is likely to increase further considering the fact that harvesting season is about two months ago.

Speaking at the monthly Consumer Price Index (CPI) release at statistics House last week, Chris N Mukiza, the Director Macroeconomics at Uganda Bureau of Statistics (UBOS), said annual core inflation (which excludes metered water, food crops and fuel) increased to 4.6% in April, up from 3.7% recorded in March 2015.

“The Uganda Shilling has continued to depreciate against the US dollar, this has seen increases in the price of imported goods into the country,” he said of the increase in core inflation.

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