The Kenya Shilling falls as Ugandan banks and businesses scramble to sell money

Panic selling by Ugandan banks and currency merchants has resulted in a sharp depreciation of the Kenya shilling relative to the US dollar, as well as a scarcity of the Kenyan unit. As a result, the Kenya shilling to Uganda shilling exchange rate dropped from Ush30 on average to a record low of Ush24 last month. The Kenya shilling, on the other hand, recovered modestly to Ush26/27 vs the Uganda shilling.Despite an open capital account framework that allows foreign currencies to enter and exit Uganda's financial system without friction, a spot-check in Kampala's downtown forex bureaus revealed an apparent scarcity of Kenya shillings among forex dealers. Kenya paid up a few big international loans that had depleted its foreign reserves during the first quarter of 2023. It has a reserve balance was insufficient to settle future obligations or safeguard its currency against external shocks .For fear of incurring trading losses on their books, Ugandan banks and forex dealers chose to sell the majority of their Kenya shillings in exchange for dollars. This explains why Kenyan shillings are scarce," said Allan Lwetabe, Investment Director of Uganda's Deposit Protection Fund.