The shilling has overall performed beyond expectations, remaining relatively stable in comparison to major reserve currencies and trading partners’ currencies.
Experts say because of this, the local unit’s performance has resulted in both nominal and real exchange rate appreciation.
Bank of Uganda’s Director Research Adam Mugume says: “In nominal terms, the shilling has appreciated by about 6.5 percent between January 2013 to date.”
This was from an average monthly mid-rate of Shs2683.8 to the current Shs2509 against the United States dollar.
This, however, has rendered imported consumers goods in Uganda shillings terms. “Indeed, for instance fuel pump prices declined close to Shs500 between January 2013 and January 2014,” Dr Mugume notes.
Barclays Bank’s manager Money Making Faisal Bukenya predicts a strong and stable shilling in 2014.
The biggest impact, he says, is in terms of its stability as this will allow private sector investors to plan well without putting margins on their activities due to uncertainty.
On the prospects in 2014, Dr Mugume says: “It is still uncertain, but the economy is projected to remain buoyant, with both private sector investment and consumption picking up, reflecting the declining uncertainty from the global economy and the easing of credit conditions.”
Although the economy has recovered strongly, the recovery was largely driven by public investment. In 2014, both private and public expenditures could drive growth much more than currently projected.