BusyMarkets Kampala #015: UGX stable despite stifling forex reserves

BusyMarkets Kampala #015: UGX stable despite stifling forex

Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Financial investments are subject to market risks, and readers should do their own research and consult with a professional advisor before making any investment decisions. Furthermore, the views, information, or opinions expressed herein are solely those of the author in their personal capacity; they do not necessarily reflect the views of the author’s employer or BusyContinent.

The UGX has held steady the past fortnight entering the weekend and this was supported by decreased demand for dollars from merchandise importers and traders in the interbank market. Trading at 3,665/ 3,677 at most financial institutions and forex bureaus around town like Dollar House, Metropolitan etc. My Fear is that this exchange regime could be temporary.


World Bank’s International Debt data reveals that EAC countries are struggling to accumulate sufficient forex reserves to meet loan obligations compounded by flagging export receipts and depreciating currencies, which has made the cost of dollar-denominated loans shoot up.

Deteriorating forex reserves are largely due to the countries share of debt service-to-total govt spending accelerating faster than foreign currencies regional central banks can stock pile through export receipts and remittances. Bank of Uganda indicates, debt had by March grown to Shs86.35 trillion, which is approximately 49.6 percent of gross domestic product.

Some crucial world news

U.N. Secretary-General Antonio Guterres, Russia's Defence Minister Sergei Shoigu and Turkish President Recep Tayyip Erdogan attend a signing ceremony in Istanbul, Turkey July 22, 2022
U.N. Secretary-General Antonio Guterres, Russia’s Defence Minister Sergei Shoigu and Turkish President Recep Tayyip Erdogan in Istanbul, Turkey July 22, 2022

The Ukraine-Russia grain deal has expired. Brokered by UN and Turkey in July 2022, it established a sea corridor allowing Ukraine’s agricultural goods to reach global markets.

Has the deal worked?

By ensuring security of grain cargo in the black sea, the deal has allowed the export of nearly 33 million tones since it entered force on 1st August 2022, mostly wheat and maize. This crucial deal affects the price of bread, beer, confectionary etc. in Uganda. We wait to hear what will come of negotiations between the Turkey president, Zelensky and Putin. That way we will make more economic sense of it and how it affects the micro economics in Uganda.

Stock Market

Below are a few stock prices of which have been largely unchanged for the past one month.

Stock  Closing Price
British American Tobacco     15,000.00
Bank of Baroda             15.89
MTN           170.00
UMEME           440.00
East African Breweries       4,076.00
Kenya Airways             99.00
Cipla             70.00
Stanbic             26.00

British American Tobacco Uganda Limited will be paying a dividend of UGX 209 on 1st August 2023, to shareholders whose name is on the company register at close of business today.

BusyMarkets Kampala #015: UGX stable despite stifling forex

In other news, an investigation found that investor data was exposed to hackers. Details from the year-long investigation found that personal data like usernames, passwords, plain text credentials, access tokens had been exposed to unauthorized third party for weeks.

Additionally, the investigation also found that USE has failed to fulfil its duty as a data collector when it failed to ensure that Soft Edge (System/Software Providers) to protect individual’s personal data. The implication of this news is that it created mistrust and once the trust is broken, it might lead to lesser interest and several parties being penalized.

Money Markets

The overnight money was trading at an average of 10% compared to the one-week money that was trading at an average of 10.5%. As earlier predicted in the previous post, interest rates have steadily continued to subdue as per what’s prevailing/indicative below.

91DAY T-BILL    9.80% per annum

182 DAY T-BILL 10.07% per annum

1YEAR T-BILL    12.00% per annum

The 20-year bond came back with results announcing 15%. Investors will likely be unhappy about this rate considering the same govt paper’s (20 year) interest has slumped from 18.5% same time, last year to 15% now. Below is how the other Treasury bonds are doing.

2YEAR T-BOND 13.50%

3YEAR T-BOND 13.50%

5YEAR T-BOND 14.75%

10YEAR T-BOND 15.70%

15YEAR T-BOND 17.00%

*All rates are per annum.

Closing thoughts

Finally, there happens to be a treasury bills auction this week on the 19th July 2023. I predict rates to hold still as government isn’t in dire need to fund new infrastructure projects.

We also wait to see what the discussions between the Iran president and H.E Museveni last week yielded as regards to oil exploration. East African Corporation for Oil Production (EACOP) has been getting a big backlash from European Union and the US. The Ugandan govt is gradually looking for new partners for the multibillion project outside Europe.

Seth Nuwagaba is an investment banker at one of the biggest banks in East Africa.