Bloomberg News

Ugandan Shilling Falls First Day in 3 Even as Bank Raises Rate

September 06, 2011

Sept. 6 (Bloomberg) -- Uganda’s shilling, the world’s worst performer this year, weakened for the first day in three after the central bank’s interest-rate failed to curb demand for the dollar.

The currency of East Africa’s third-biggest economy depreciated 0.3 percent to 2,816 per dollar by 3:44 p.m. in the capital, Kampala, according to data compiled by Bloomberg. The currency closed at 2,808 yesterday.

Uganda’s central bank today boosted its benchmark interest rate by 2 percentage points to 16 percent to curb a slump in the shilling and rein in inflation, Deputy Governor Louis Kasekende said today. The shilling, which reached the weakest since 1993 on Aug. 26, has declined 8.6 percent in the last two months and 18 percent this year against the dollar, making it the world’s worst-performing currency during both periods against the dollar.

“There is still some strong demand for the dollar by different sectors,” Lucas Ochieng, the head of currency trading at Orient Bank Ltd., said by phone from Kampala.

The central bank sold $107 million since the beginning of the year to shore up the shilling, Adam Mugume, the acting executive director for research, told reporters today in Kampala.

A surge in food and fuel prices pushed inflation to a more than 18-year high of 21.4 percent in August from 18.8 percent in July, the Uganda Bureau of Statistics said on Aug. 31.

A delay in passing the government’s budget, normally done in July, has contributed to the shortage of the local currency in the market as is has delayed government expenditure, Orient’s Ochieng said.

--Editors: Ana Monteiro, Stephen Kirkland

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

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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