Shilling expected to continue strong

Growing offshore inflows and timely entry of remittances have helped to lift the shilling.

Kampala

The shilling will for the better part of this year maintain its strength against the dollar supported by the highly billed demand for government treasury instruments, the central bank has said.

Mr Stephen Kaboyo, the Bank of Uganda director for financial markets told Daily Monitor yesterday the high interest on Treasury Bills and Bonds, had excited off-shore investors leading to increased forex inflows.

“Our interest rates on treasury bills are very attractive and this has increased dollar inflows in the economy, thus the appreciation of the shilling. If the attractive rates remain, the shilling is expected to stay strong,” Mr Kaboyo said.

BoU gives a rate of 23.1 per cent on T Bills and 21.1 per cent on T Bonds.
In a bid to strengthen the local unit and stabilise the foreign exchange market, the central bank last year issued a number of treasury instruments, leading to a surge in dollar inflows from offshore investors.

For instance in December last year, the central bank issued two T Bills of Shs100 billion (91-days) and Shs110 billion (one- year) respectively. Last month, the bank issued a three-year T Bond of Shs95 billion.

The move to issue highly billed government papers has assisted to cushion the shilling from further collapse lifting the unit by about Shs600 since November last year.

By close of business yesterday, forex traders quoted the shilling at Shs2,309 buying and 2,319 selling against the dollar. The gain according to analysts has been lauded indicating positive prospects for the unit that had dropped to sell at about Shs2,900 in August.

fkulabako@ug.nationmedia.com