Important note: Information in this article was accurate in 2004. The state of the art may have changed since the publication date.
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New Vision - December 30, 2004
Sylvia Juuko and Paul Busharizi
The shilling's fortunes will give way to the launching of the Customs Union (CU) on Saturday, which will be the next most significant factor in the economy.
In 2004, the power deficit widened to about 110 megawatts at peak hours, necessitating the return of load shedding.
Six years ago, before the commissioning of Kiira power dam, when there were daily power outages, a World Bank study showed that load shedding was costing Uganda's private sector 30 working days a year, a scenario likely to repeat itself.
"The power shortfall this year has been a great setback to manufacturers. Many companies are not operating at full capacity," Uganda Manufacturers' Association executive director Hillary Obonyo said.
However, sources say the Government has just concluded negotiations with a Nordic firm, SN Power, to begin development of hydro-power at Karuma falls, which will run concurrently with developments on the beleaguered Bujagali dam.
"That has always been the Government's position," Electricity Regulatory Authority's chief Dr Frank Sebbowa said.
"We believe the first dam will be ready earliest 2008," Sebbowa said.
Meanwhile, the Government is fast tracking the commissioning of thermo power generators to bridge the power deficit.
Not any less dramatic was the surprising gains by the shilling against the dollar this year.
In February, the shilling broke the 1,700 to the dollar mark for the first time since 2001. Starting in the last quarter of 2003, foreign inflows, especially from Kenya, rushed in to take advantage of the competitive treasury bill rate, while the shilling found more support in the second half of 2004 from aid money targeted especially at AIDS projects.
The shilling will end the year at nearly sh200 stronger than the December 2003 average of 1,944 to the dollar.
Currency dealers expect the shilling to face depreciation pressure at the beginning of 2005, but remain stable through out the year.
"The shilling will weaken at the beginning of next year because companies will be remitting dividends during late December, January and February. That will exert demand pressures, which will see the shilling weaken," David Bagambe dfcu bank's chief dealer said.
"The shilling is expected to remain stable during 2005 owing to Bank of Uganda's (BOU) tighter control of government inflows and outflows. Local and foreign currency accounts are moving to BOU and they account for huge demand and supply in the foreign exchange market," Bagambe said. With the shilling's fortunes under control, the CU should preoccupy the business people more.
While the CU has created uncertainty, manufacturers are optimistic about opportunities.
Some of the concerns have been competition from bigger industries in Kenya in comparison to Uganda. On the macro economic front, indicators were relatively stable with inflation remaining at single digits. Growth was projected at 5.5% and revenue collections achieved targets.
Peter Allum IMF'S resident representative said recently that if the Government implements structural reforms across the board, prospects of growth are high.
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