Uganda importers reap from shilling’s fall in forex market
August 28, 2008: The sharp drop in Kenya’s earnings from tourism and a sluggish growth in commodity prices is stacking up through the hub of the US dollar to a bonanza for Ugandan buyers of Kenyan goods.
With most of the world’s currencies driven by their central value against the dollar, the Kenyan shilling’s slide against the dollar has seen it lose ground against every currency that is holding its dollar value, including that of its biggest export market, Uganda.
The Ugandan shilling, supported by buoyant dollar-denominated aid flows, is suddenly looking a lot more valuable compared with the Kenyan currency.
While a Kenyan shilling in April would buy 27 Ugandan shillings, today it buys just 23, a tumble of some 15 per cent.
The cause, say traders, is the Kenyan shillings retreat against the dollar, while the Ugandan shilling has held its dollar ground: thus the two now buy different amounts in the world, even though Kenya’s exports to Uganda have been robust, after the first quarter setback.
For Kenyan exporters, the depreciation against the Ugandan shilling comes at a hard moment. Kenya supplies many of Uganda’s manufactured goods and particularly those made from oil.
This means that Kenyan producers are being hit in the marketplace from two sides. Just as they are being squeezed on one side by rising oil prices, they have to take a beating of lower revenues in their biggest export market.
This latest impact of the decline in foreign exchange earnings highlights the potential scale of secondary impact from the knock-out of an important export earner such as tourism, even as the industry gears itself back up, with bookings returning and money moving once again.
Yesterday, the Kenya Shilling weakened against the greenback to exchange at 69.09, a level that was last seen in February 2008 at the height of political turmoil that rocked the country in the wake of a disputed outcome of December’s presidential poll.
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