List of foreign exchange bureaus in Uganda
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Many people in the business community are concerned about the developments in the exchange rate. Uganda is, however, not alone in this respect. Many emerging and frontier markets have suffered similar problems to Uganda over the last 12 months because export commodity prices have fallen, demand in key export markets has weakened and it has become more difficult to mobilise capital on international markets. For Ugandan importers and exporters, the most relevant measure of the exchange rate is the trade weighted exchange rate index, which is based on a basket of currencies from the countries with which Uganda conducts international trade.
The trade weighted exchange rate index depreciated by Why did the Shilling depreciate? Dollar house forex rates uganda has a market determined exchange rate. As such the strength of the supply of, and demand for, foreign exchange are the dollar house forex rates uganda factors which determine the exchange rate. Developments in the balance of payments BOP determine the supply of, dollar house forex rates uganda demand for, foreign exchange.
This was mainly because our exports of goods and services fell in the last fiscal year. Despite the fall in the price of oil, which enabled Uganda to reduce its fuel dollar house forex rates uganda bill, imports of goods and services increased, partly because of higher government spending on imports related to infrastructure projects but also because of stronger demand from the private sector for non-oil imports. Our current account deficits have to be financed by surpluses on the financial account.
The fall in FDI in the last fiscal year was mainly because of lower foreign investment in the oil industry. What are the prospects? Global economic growth is forecast to remain weak. Nevertheless, I expect a modest improvement in the BOP in this fiscal year for two reasons. First, the exchange rate depreciation which has taken place over the last l6 months should have strengthened the competitiveness of our traded goods industries and boosted demand for our exports. For example, it will be cheaper for tourists to visit Uganda.
Secondly, we are dollar house forex rates uganda a rebound in FDI, especially related to the oil industry, and financial inflows for the large energy projects of Karuma and Isimba, which will contribute to a larger financial account surplus.
How does the depreciation of the exchange rate affect manufacturing industry? Manufacturing firms are among the largest users of foreign exchange in Uganda.
Depreciation will make these inputs more expensive. Traded goods are either exported or are sold in the domestic market but face competition from imports. As such, the real exchange rate matters for the competitiveness of traded goods. Uganda adopted a flexible, market determined exchange rate in the early s, because it offered two crucial advantages over a fixed, or dollar house forex rates uganda, exchange rate.
First, exchange rate flexibility helps dollar house forex rates uganda economy to adjust to external shocks, for example by improving the competitiveness of traded goods industries when there is a negative shock. Exchange rate flexibility has contributed to the sustained growth of the Ugandan economy over more than 20 years. In the face of the worsening external economic environment, exchange rate depreciation is unavoidable.
It is not sustainable for the Bank of Uganda to try and prop up the exchange rate, at levels which are not consistent with supply and demand in the foreign exchange market, by intervening and selling foreign currency. The BOU would simply deplete its foreign exchange reserves if it attempted to do this. Furthermore, depreciation can help the Ugandan economy adjust to a dollar house forex rates uganda challenging external environment, by boosting the competitiveness of traded goods industries, including manufacturing industries, and by encouraging Ugandans to purchase domestically produced goods rather than imports.
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