Uganda's macroeconomic performance review

Uganda's economy has been under the microscope lately as the Ugandan shilling experiences fluctuations against the dollar. Daisy Anthea Nitwe, Country Lead for Derivatives & Structured Solutions at Standard Bank Group, shed light on the factors influencing this volatility in a recent interview on CNBC Africa. Nitwe pointed out that a slowdown in foreign currency inflows, specifically from the coffee sector, has contributed to the recent depreciation of the Ugandan shilling. Additionally, increased demand from key sectors such as oil, gas, and telecommunications has put pressure on the currency. The combination of these factors, along with banks being square from a dollar liquidity perspective, has led to a 0.7 percent depreciation in the last two weeks. Looking ahead, Nitwe predicted that the depreciation trend is likely to continue due to seasonality factors, with demand expected to outstrip supply in the coming months. She emphasized the importance of monitoring the Federal Reserve's policy direction, as any potential rate cuts could impact foreign financing costs for countries like Uganda, Kenya, and Tanzania. Nitwe also highlighted the significance of debt sustainability and access to capital markets in the region, noting that a potential rate cut by the Fed could lead to increased portfolio flows into emerging economies, including those in East Africa. Overall, Nitwe expressed cautious optimism for the region, highlighting the potential benefits of a more favorable funding environment and increased investor interest in local markets.