The recent depreciation of the Uganda Shilling and its implications to the inflation rates in the country is expected to top the agenda of the final 2016 Monetary Policy Committee (MPC) meeting today.
In the last two months, the Uganda Shilling has depreciated, reaching low last seen fourteen months ago. The MPC meeting will seat today at Bank of Uganda (BoU), to set the Central Bank Rate (CBR) for December.
The Uganda Shilling depreciated from Shs3,305 in May and reached Shs3,625 by this month. The depreciation has been attributed to global sentiments and the high dollar demand from importers.
Recently, Mr Matia Kasaija, the Finance minister, noted that the Shilling could fall further into depreciation with the rising demand for imported goods.
“Now that Christmas and New Year are coming, you are going to see all sorts imported products. No wonder your Shilling is under extreme pressure,” he said recently at a forum organised by the Advocates Coalition on Development and Environment.
The pressure on the Shilling comes with inflationary pressures that the BoU’s MPC will look at as they set the CBR. In the October meeting, Mr Emmanuel Tumusiime-Mutebile, the BoU Governor, noted that “while the Bank of Uganda expects core inflation to remain around 5 per cent within this financial year, this will primarily depend on the exchange rate movements as well as the impact of less than normal rains for the current season.”
Already the drought conditions in the country and intermittent rains are leading to increments of food prices. This will be part of the factors BoU will likely use to bring to a halt any easing on the CBR. The last four meetings have seen BoU reduce the CBR, with the last one, 13 per cent, reached in October.
“There are key pressure points that are likely to influence the policy direction. These are the recent depreciation of the Shilling and the movement in food prices. (But the CBR) would probably stay put until early 2017,” Mr Stephen Kaboyo, the managing partner Alpha Capital, said.
©Alleastafrica and Daily Monitor