Bloomberg News

Ugandan Shilling Weakens on Dollar Demand by Energy Importers

July 19, 2011

July 19 (Bloomberg) -- Uganda’s shilling weakened for a second day against the dollar amid demand for the U.S. currency by domestic importers of oil and energy equipment.

The currency of East Africa’s second-biggest coffee producer weakened 1 percent to 2,600 per dollar at 11.55 a.m. in the capital, Kampala. It closed at 2,575 yesterday.

“There is basically corporate demand for the dollar arising from the energy sector, both oil importers and of importers of equipments like generators,” Benon Okwenje, a currency trader at Stanbic Bank Uganda Ltd., said by phone from Kampala.

Uganda, East Africa’s third-biggest economy, has faced electricity shortages since July 5 after independent generators who sell to the state-run Uganda Electricity Transmission Company cut off supplies to the national grid over accumulated debts, according to Umeme Ltd., the power distributor. Power deficits forced companies to buy generators as well as oil to fire them, Okwenje said.

Uganda’s currency is the world’s third-worst performer this year, after Suriname’s dollar and the Maldives rufiyaa, according to Bloomberg Data. The currency has weakened as inflation accelerated to a 17-year-high of 16 percent in May, before slowing to 15.8 percent last month.

--Editors: Paul Richardson, James Kraus.

To contact the reporter on this story: Fred Ojambo in Kampala via Nairobi at pmrichardson@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net.


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