Bank of Uganda intervenes to stabilise shilling

The central bank has intervened to stabilise the weakening shilling. In a statement released by the director of Communications Ms Christine Alupo, the Bank of Uganda on Thursday July 9, 2015 intervened on the sale side of the interbank foreign exchange market.

As a result, the bank sold U.S dollars to the market in order to smoothen out the excessive volatility in the movement of the exchange rate.

It should be noted that while Mr Tumusiime Mutebile was speaking at a meeting organised by Uganda Manufacturers’ Association in Kampala last week, he expressed frustration over the weakening shilling adding that:  “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.”

However, the statement released by the central bank argues that the intervention is intended to remove the spikes in the movement of shillings against the dollar that have been observed lately.

“….The recent sharp movement of the currency partly resulted from negative sentiment about the shilling. The BoU is not indifferent to the volatility in the foreign exchange market and stands ready to intervene whenever it is necessary,” The statement reads in part.

“Today's actions are not aimed at official determination of the exchange rate. The Uganda shilling exchange rate remains market determined. The Bank does not target the level or direction of the exchange rate,” The statement continues.

By the time of the statement, the dollar was selling at shs 3339.83 and buying at 3329.83 according to the Bank of Uganda.