Uganda and Tanzania currencies top, Kenyan shilling and Rwandan franc lose value
The currencies of Uganda and Tanzania are the best performing mediums of exchange in East Africa against the dollar, while the Kenyan and Rwandan currencies continue to lose value against the greenback.
According to data from Bloomberg Refinitiv, the Ugandan shilling continues to hold up against the dollar, followed by the Tanzanian currency at 2.45% and 0.76%, respectively. They are among the six African currencies with a positive outlook, with the kwacha remaining the best performing at the end of November, appreciating to 19.64%, followed by the Mozambican metical and the Angolan kwanza second and third respectively.
The Kenyan shilling and the Rwandan franc were ranked 11th and 12th among major African currencies, depreciating to -2.93% and -3.48% respectively.
Monetary policy in most of Africa is characterized as flexible without pegging the exchange rate to the dollar.
The Ugandan shilling is expected to remain high through the end of 2021, supported by dollar inflows from coffee exports and foreign investors seeking yields.
Uganda is Africa’s largest coffee exporter and shipments hit a record high in June thanks to better yields from new trees, favorable weather conditions and better prices, according to the Uganda Coffee Development Authority.
The pandemic has hurt the economic output of the net importer, but the country remains optimistic and the dollar will continue to appreciate after Covid.
“In 2021 and beyond, the shilling could benefit from an expected depreciation of the dollar against other reserve currencies. In addition, the prospects of a post-pandemic rebound in global growth and trade in 2021 and the reduction in the risks of unpredictable trade wars are expected to result in reduced exchange rate volatility, ”said Dr Adam Mugume, Executive Director of Research Bank of Uganda.
In mid-November, the IMF disagreed with Kampala, calling Uganda’s currency overvalued and urging the authorities to intervene only in times of “extreme” market distress.
Given the uncertainties associated with the pandemic and the recent appreciation of the exchange rate, the planned fiscal consolidation in Uganda will help reduce the current account deficit. The gap widened to $ 1.28 billion in the second quarter, from a deficit of $ 702.3 million in the previous three months.
The IMF will visit Uganda this month to assess the “reform program” and discuss the next tranche of a $ 1 billion loan over three years. Uganda received $ 258 million when the loan was approved in June.
In Tanzania, the shilling has continued to gain ground against the dollar in recent weeks thanks to a steady flow of greenbacks from tourism, exports and funds from development partners.
The BoT expects the shilling to remain stable in the coming months.
The BoT’s latest monthly economic review shows that Tanzania earned $ 2.94 billion from gold exports in the year through August 2021, a significant improvement from $ 2.735 billion in the same period. Last year.
Tanzania also recorded a 33.2 percent increase in exports of manufactured goods to $ 1.125 billion as of August 31.
In Kenya, the shilling fell to a new all-time low on December 1 when it traded at Ksh 112.83 against the dollar.
The shilling, which opened the year at Ksh 107.23, lost ground against major world currencies despite extensive backing from the CBK to iron out volatility.
Analysts say the shilling, like other currencies, is feeling the heat of global inflation, with economies like the US and UK experiencing the worst cost of living in nearly two decades.
The inflation rate in the United States hit a 13-year high in September, with rising food and shelter costs pushing the rate up to 5.4 percent. In the UK, annual inflation has accelerated to its fastest rate in a decade, reaching 4.2 percent last month.
This week, Kenya’s National Bureau of Statistics said the cost of living fell to 5.8% in November thanks to the drop in the cost of petroleum products.
Despite this, the prices of household products like sugar, corn flour and cooking oil have risen in recent days as importers pass high currency bills to consumers.
The CBK had warned that the weakness of the shilling would not only increase the cost of living but also the service of the debt.
Despite this, CBK Governor Patrick Njoroge insists that the shilling is not disproportionate to other currencies.
Njoroge said that while the shilling has lost 3% of its value against the dollar in the year to date, the yen, Swedish krona and euro have lost ground by 10.3, 9.0 and 7.9% respectively.
“The question of whether we have been lagged against other currencies does not arise. Basically it has to do with the strengthening of the dollar against most currencies, ”he added.
– MPC press briefing on Tuesday.
The CBK says it has maintained its policy of non-intervention on foreign exchange, intervening only to eradicate the volatility that would leave the economy vulnerable to instability.
Since November 9, the shilling has consistently hit record lows against the dollar, with the local unit Ksh 112.38 recovering a greenback as the market closes on November 26, as data from the CBK.
Banks sell the dollar between Ksh 114 and Ksh 117 on a parallel market.
CBK documents show the financial regulator has been in the market for five months in an attempt to stabilize the shilling. But it had very little effect.
In Rwanda, the IMF mission, led by Haimanot Teferra, continued its visits to discuss unprecedented political support, large remittances, efforts to increase the immunization rate and progress in structural reforms. which support the economic recovery in 2021. Growth is forecast at 10.2%. , against a significant contraction of 3.4% in 2020.
The outlook benefits from the positive spillover effects of the global recovery. Policies to attract private sector investment and manage climate change will remain essential for more sustainable, inclusive and resilient growth.