Overview:
Uganda's central bank holds its key interest rate at 9.75% as the shilling gains value against the US dollar, reflecting confidence in the country's economic stability.
KAMPALA, UGANDA – The Ugandan shilling has reached its highest level in over two years, supported by strong inflows from exporters and subdued demand for the US dollar.
The currency ended the week at 3550/3560 against the dollar, its best performance since early 2022. According to traders, steady foreign exchange flows, particularly from commodity exporters, and mid-month tax payments contributed to the shilling’s strength.
The Bank of Uganda (BoU) this week opted to keep its key lending rate on hold at 9.75%. The central bank cited a need for caution despite low inflation and steady economic growth. The BoU projects inflation to remain within the 4.5% to 4.8% range for the current financial year, helped by the stable shilling and falling global oil prices.
Analysts expect the shilling to remain firm in the coming weeks. Stephen Kaboyo of Alpha Capital noted that investor confidence in the domestic economy and continued foreign exchange inflows are likely to power the currency to a “fresh record peak.”
In neighboring Kenya, the shilling traded steadily. Globally, the US dollar strengthened after data showed higher-than-expected wholesale inflation, cooling expectations for a significant interest rate cut by the US Federal Reserve.