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Museveni, economists disagree over Shilling

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by ByaseL, Jul 8, 2011.

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    ByaseL JF-Expert Member

    Jul 8, 2011
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    President Museveni’s idea that the current economic crisis which has seen the shilling take its biggest battering against the dollar in recent times is something to celebrate about especially for those who export has left economists dismayed.

    The President’s argument is reflected in a June 6 article he sent to media houses yesterday in which he dismissed talk about the Uganda shilling collapsing and said a more expensive dollar should be good news for the country.

    Mr Museveni wrote that “provided the economy is well-managed internally, especially the monetary policy (supply of money within Uganda), a more expensive dollar is good for Uganda’s exporters.”

    He wrote that tourists would be happier coming to Uganda because the dollars they come with will give them more shillings, but admitted that traders who make a livelihood by importing “will definitely have a by importing “will definitely have a hard life.”

    “The more dollars we bring into the country, the cheaper the dollar will become compared to the shilling,” he wrote. His letter came on the heels of a two day strike by city traders against a weak shilling which ended yesterday.

    However, a cross-section of economists yesterday punched holes in the President’s observations. Mr Nicholas Malaki, manager at Pinebridge Investment, argued that while exporters may rake in the money, the country finds itself in a tricky situation because the Ugandan economy is mainly import- based.

    “It’s a 50-50 situation,” he said, “but on a whole it’s bad for the economy because Uganda is a net importer of finished goods as well as capital goods like machinery.”

    Shadow Finance Minister Geoffrey Ekanya echoed his comments and said the country’s balance of payments (BoP), a record of total payments to foreign countries including the price of imports, the outflow of capital along with the price of exports and inflow of capital, reveals there is little to celebrate.

    “The President’s reasoning should be based on our BoP. What is the contribution of exports to our budget? If it was 60 per cent then government is okay to say that people are going to make money. But it is not,” said Mr Ekanya.

    Figures from the US Central Intelligence Agency fact book show that by the end of 2010, the country imported almost twice as much as it exported with total exports standing at $ 2.9b (Shs5.8 trillion) compared to imports of $4.4 b (Shs8.8 trillion).

    The President’s letter resonates with comments he made on Wednesday when he told an audience who attended the launch of his wife’s autobiography, that while he has heard the cries of his countrymen who say “the dollar has gone up so what shall we eat”, he is not bothered by the recent spikes in the dollar exchange rates.

    “When you have problems of imported food, for me I am not bothered…I am not concerned because all the food I am eating is local,” he said.
    However, Mr Malaki said because the country is “in a situation where we are doing a lot of development expenditure”, imports will continue to outweigh exports.