At least $20m worth of foreign currency is traded monthly between banks in Uganda, according to a trading expert.
Speaking during a panel discussion on the current state of the financial markets at the Barclays Bank organised dealers meeting, Mr Peter Mbowa, the Barclays Bank (Absa) head of treasury, said there has been a steady inflow of foreign currency into the market, noting that: “On average, the volume of dollars traded in the interbank market is about $20m a month.”
Speaking during a panel discussion on the current state of the financial markets at the Barclays Bank organised dealers meeting, Mr Peter Mbowa, the Barclays Bank (Absa) head of treasury, said there has been a steady inflow of foreign currency into the market, noting that: “On average, the volume of dollars traded in the interbank market is about $20m a month.”
On the whole, he said, Uganda has a dollar
demand of $800m per month with exports needing at least $300m compared
to $500m for the import bill.
However, Mr Mbowa noted, the Ugandan currency market lacks sophistication and cannot absorb large volumes of foreign currency.
Ms
Brenda Lwanga, a currency trader at Citi Bank, said the shilling has
been strong against the dollar because of a strong currency portfolio
inflow in the last few months, which has seen demand and supply
matching.
“In the past six months, the shilling has
been appreciating against the dollar because of the inflows,” she said.
But noted that activities in the currency market in the past two weeks
have not been good given that the shilling had depreciated against the
dollar in the period.
However, during the discussion,
other panelists including Mr David Bagambe, a senior trader at Diamond
Trust Bank, Mr Philip Ssail from Standard Chartered and Mr Julius
Kateera, the head of treasury at dfcu Bank, said the country is expected
to experience a volatile foreign exchange market next year ahead of the
2021 elections.
“We expect volatilities in the foreign exchange market in 2020
as we lead into an election period. We could see a lot of volatility in
the market,” they said, expressing fears over Uganda’s large current
account deficit, which also poses risks to the depreciation of the
shilling.
Mr Mbowa said Uganda has had a long history
of large current account deficit over the years, which in some cases has
been financed by the surplus in the capital account. But noted it is
not clear whether government will continue to have a surplus in the
capital account.
The meeting also discussed the issue
of interest rates, which a number of panelists agreed have remained
stable since the beginning of the year amid continued reduction in the
Central Bank Rate.
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