KAMPALA: The monetary policy report by Bank of Uganda (BoU) has revealed that in the first four months of 2015/16, the value of goods exported fell by 4.6 per cent due to slower demand for the Ugandan exports amid decline in global commodity prices.
BoU says the decline in exports was as a result of a reduction in the prices which declined by 7 per cent as opposed to volume that increased by 2.5 per cent in the same period.
“The decline in price index is reflective of the impact of the decline in global commodity prices. Indeed, compared to the quarter ended October 2014, coffee export earnings recorded in the quarter to October 2015, decreased by $2.4m from $87.2m,” says BoU in its highlight of monetary policy report.
“However, the total volume of coffee exported during the current quarter increased by 125,083 (60 kg) bags compared to 705,394 (60 kg) bags exported in the same quarter during 2014,” BoU added.
BoU executive director research Adam Mugume said last week the weak global economic growth has led to low demand for export goods in the international market, a development which has seen a fall in commodity prices.
He said the decline in the value of Uganda’s exports will continue having a negative impact on the country’s balance of payment position.
On the exchange rate, BoU says heightened depreciation pressures that ensued in early 2014 through August 2015 have reduced in October and November 2015. On a month-on-month basis, the Shilling appreciated 5.7 per cent in November 2015 following a slight appreciation of 0.9 per cent in October 2015.
On a year-on-year basis, the report shows that the Uganda Shilling depreciated by 16 per cent on a trade weighted basis and 25.4 per cent against the US dollar to an average mid-rate of Shs3,429 per dollar in November 2015. Dr Mugume explained that the stability observed in the exchange rate is mainly attributed to the correction of overshooting on the depreciation side and the tightening of monetary policy that has resulted in contraction of demand for imports. “The slowing down of domestic economic activity has meant less demand for foreign currency,” he explained.
The BoU report shows that money market rates remained broadly consistent with the monetary policy stance despite the structural liquidity which was in part moderated using Repurchase Agreements.
BoU says the period under review yields on government securities remain elevated following an upward trend from the onset of the fiscal year 2015/2016 in part reflecting the tighter monetary policy stance.
“Yields, however, eased slightly in November and December 2015, in part due to eased liquidity conditions and lower inflation expectations following the monetary policy tightening,” BoU said.
Uganda remains a net importer meaning it imports more goods than it exports. According to statistics from Kenya Revenue Authority, the total imports (goods ferried into Uganda) stand at a staggering 97 per cent. The port of Mombasa only handles seven per cent of Uganda’s total exports.
