What you need to know:
The export market has been affected by instabilities in South Sudan and DR Congo.
Kampala- Uganda’s trade deficit is to remain large for a long time due to the political situation in South Sudan and Democratic Republic of Congo, which are her prime export markets, the chief economist for Barclays Africa has predicted.
Trade deficit is an economic measure of a negative balance of trade in which a country’s imports exceeds its exports.
Speaking to Daily Monitor on the sidelines of the Barclays Africa Economic Outlook workshop held in Kampala last week, Mr Jeff Gable said: “Our concern is that the economic opportunity of South Sudan is still struggling in an environment where security and political issues are at the front.”
Mr Gable added that the low commodity prices in DRC will also limit its ability to pay for exports and demand which are largely from the Ugandan market. He, however, noted that the two markets would have been a positive story for Uganda, but there will be challenges for some time.
“The trade account is made up of both exports and imports. Further increase in investment and infrastructure here in Uganda, where we are struggling to export will increase imports, and those two things together will make the trade deficit large for a while,” Mr Gable said.
Presenting on African’s economic outlook, Mr Gable said trade deficit widening will weaken the local currency whereas a push in infrastructure will put a strain on the national budget.
“The Shilling is expected to weaken against foreign currencies more than appreciate like we saw in the first few weeks of the year,” Mr Gable observed, adding that every month, we import more than what we export.
The managing director Barclays Bank Uganda, Mr Rakesh Jha, said the workshop offered an opportunity for customers and key stakeholders to interact with Barclays experts.
“The risk management workshop is an annual event. It’s a partnership between the bank and its customers to understand specific requirements for specific solutions. It also focuses on Risk Management Products and the different ways you may utilise them to manage the various financial risks,” Mr Rakesh explained.
According to a statement released by the Ministry of Finance last month on the half year fiscal expenditure off the 2014/2015 approved national budget, balance of payments figures showed that a deficit of Shs5 trillion was recorded as the current account balance.