The private sector wants government to deal with export trade barriers which largely explain the depreciating Shilling rather than give excuses for the currency volatility.
Talking to Daily Monitor last week in Kampala, Private Sector Foundation Uganda executive director Gideon Badagawa said Uganda is a net importer and so long as the situation remains the same, the economy will always be vulnerable to shocks from the declining value of the Shilling.
Commenting on recent remarks by Finance minister Matia Kasaija that tear gas, among other imports, is responsible for the loss of value of the Shilling against the dollar, Mr Badagawa said government should deal with the problem and not whine about it.
He said: “Importing tear gas is one thing, but the real issue here is we are not attracting enough foreign direct investment and the Central Bank must do more in ensuring less outflow of foreign currency.”
He added: “The solution lies in dealing with the real problem which is improving our exports and others, including importing tear gas are just symptoms of the disease,” In agreement with Mr Badagawa, is economic analyst Augustus Nuwagaba, who said the difference between $4.3b (about Shs15.4 trillion) spent on imports and $2.2b (about Shs7.9 trillion) accrued from exports annually is so huge a difference that the amount spent on tear gas alone is a drop in the ocean.
According to Mr Nuwagaba, the way forward is to deal with the election speculation that is preventing industrialists from investing in Uganda, reducing the interests rates so that private sector can borrow without fear of defaulting and to work towards focusing more on export than currently it is the case.
From January 2 to March 2, the Shilling depreciated against the dollar, from Shs2,784 to Shs2,896 before surpassing the Shs3,000 mark. The unit closed the week at Shs3,600, highlighting the volatility that has kept the currency under pressure against the dollar and other major currencies.
Meanwhile, exports to South Sudan, Uganda’s largest export market, dropped by 40 per cent from Shs1 trillion in 2012 to Shs603b in 2013. The December 2013 export figures are the lowest since September 2007 on a monthly basis.