{UAH} Why Shilling Depreciation & Dollarisation of Uganda Economy

 

Akim, George

We have got too many banks in the first place all chasing a few customers. All stock trades are basically merchant banks registerd in tax heavens! Uganda stock marett is very small compared to Kenya. Then commerical banks from every where.

 

Moreover people are shifting from the banking hall to mobile banking. These banks make lots of money through buying government securities and instruments, then they repatriate all earnings on a weekly basis leaving the market with no dollars and more volatile than it would necessarily have been. There is need for empirical data on bank earnings on a weekly and monthly basis.

 

There real problem is the money market which is so liberal and this happens only in Uganda. Banks are trading dollars as if they are buying and selling mandazi – this is really suprising.

 

What is the limit of dollar out flow – Uganda has no limit you just take out money anyhow!

 

If the exchange rate starts jumping over a hundred shilling mark in a week, then there is a real problem. The government should increase commercial and merchant bank deposits to first and foremost bring back the dollars deposited in tax heavens. Then force these banks to merge to reduce on money market gambling.

 

A few lessons from dollar exchange rate in the 70's vis vi huge weapon purchase can suffice to inform the trend since by then, Uganda was basically only exporting coffee which is not the case today with multi billion dollar cash inflow monthly which can't prop up the shilling dollar rates!

Stopping the volatility is essentially the issue here.

Bwanika

On Tue, Jun 30, 2015 at 1:13 PM, Dan Bwanika <bulemezi@gmail.com> wrote:

The Government should wake up pretty soon and stop the terrible

shilling depreciation against the dollar.

There is need to look at Commerical and Merchant Banks investing in government securities closely and also tame outflow of money otherwise - there is an emerging problem. 

Indeed investment are at their highest implying there is importation of machinery however there is likewise huge dollar inflow in infrastructure and industrial investmentsa and developments.

Bank of Uganda , Ministry of Finance and Planning should do more to find out this incredible depreciation and its cuases!

Bwanika

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Bwanika Nakyesawa Luwero

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Bwanika Nakyesawa Luwero

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