EAC state currencies depreciated against US dollar in October – Finance

This photo taken on September 8, 2023 shows US dollars. PHOTO/AFP

What you need to know:

  • The monthly average rate was recorded at Shs3, 755.63/USD up from Shs 3,738.02/USD in September 2023.

Uganda’s Ministry of Finance has reported “a general depreciation of all currencies within the East Africa Community (EAC) partner states in October 2023.

The risks of currency depreciation can significantly impact individuals and the businesses, as it can erode the value of savings and investments and make imports more expensive, affecting the country’s balance of payment.

In the performance of the economy report for October, the ministry says the Rwandan Francs and Kenyan Shilling had the highest depreciation rates at 1.82% and 1.81%, respectively.

“The Tanzanian Shilling, Ugandan Shilling and Burundian Francs also registered depreciation rates of 0.74%, 0.45% and 0.16% respectively. The global strengthening of the dollar and higher portfolio outflows ensued by better rates in advanced economies have greatly contributed to the depreciation of EAC currencies,” the report showed.

Providing detailed depreciation of the Uganda Shilling against the US dollar, the Ministry of Finance noted that during October 2023, there was a 0.5% depreciation of the Ugandan currency against the US dollar due to high outflow of US Dollars.

The monthly average rate was recorded at Shs3, 755.63/USD up from Shs 3,738.02/USD in September 2023.

“This was attributed to higher portfolio outflows due to better rates in advanced economies, increased debt service obligations, and global strengthening of the US Dollar,” the report released on November 17 emphasized.

However, the ministry observed that when compared to the same month last year, the shilling appreciated by 1.7% from a monthly average rate of Shs3,822.3/USD to Shs3,755.6/USD.

It explained that this appreciation was mainly due to increased coffee export receipts, higher foreign investments particularly in the oil sector and increased inflows of grants and personal transfers.

Adding that: “During October 2023, the shilling gained value against the Euro and Pound sterling, posting appreciation rates of 0.7% and 1.4%, respectively.”