Weekly Africa Update: 22-05-2023

Currencies

The Ghanaian cedi (GHS) strengthened by 8.53% against the US dollar (USD) in the week ended May 19, as the International Monetary Fund (IMF) on Wednesday, May 17 approved a $3 billion rescue loan.  The USD/GHS exchange rate fell as low as 10.20 against the dollar and traded at the lowest level since mid-January 2023. 

The Kenyan shilling (KES) fell by 0.51% against the dollar after Moody’s cut Kenya’s long-term foreign currency issuer rating to B3 from B2 on May 12.  Moody’s cited an increase in government liquidity risks as one of the drivers for the rating downgrade.

The Sierra Leonean leone (SLE) continues to weaken with the parallel market having moved from 22.86 to 23.04 for dollars, a 0.79% increase in the USD/SLE exchange rate for the week, which is one of the larger weekly moves in the African FX markets.

The Ugandan shilling (UGX) appreciated against the US dollar as a result of increased dollar inflows especially from remittances and Fintech transactions, with limited activity on the demand side for dollars. Analysts expect a gradual depreciation of UGX after mid-month tax payments. The USD/UGX exchange rate closed the week at 3720.

East Africa

The East African Community (EAC) is set to develop a common energy policy to be backed with a protocol that will define the regional framework to support the development of the sector. This was said by the Uganda Vice-President, Jessica Alupo on Monday, May 15, at the occasion to officially open the 10th East African Petroleum Conference and Exhibition 2023. Vice President Jessica Alupo, who represented the President of Uganda, Yoweri Museveni, disclosed that the EAC region was cognizant of the threats posed by climate change and that the region supports measures aimed at protecting the environment. The EAC is a regional intergovernmental organization of seven Partner States including Burundi, Democratic Republic of Congo, Kenya, Rwanda, South Sudan, Tanzania and Uganda, with its headquarters in Arusha, Tanzania.

Ghana

On Wednesday, May 17, the IMF’s executive board approved a long-awaited $3 billion, three-year loan program for Ghana.  As reported by Reuters, the first $600 million tranche was released on Friday, May 19. Ghana’s Finance Minister, Ken Ofori-Atta said the funds would be used for budgetary support and to help bring down inflation, which currently stands at 41.2%.

Sierra Leone

Sierra Leone will no longer provide foreign exchange for mining companies and other large businesses to import oil as of June 1, accusing them of “stockpiling diesel fuel” its Petroleum Regulatory Agency said in a statement. Currency support by the Bank of Sierra Leone for petroleum product imports was estimated at $24 million in the first quarter of this year and mainly benefited mining companies and other major commercial users. As of June 1, all major commercial companies must directly import their own fuel or enter into foreign exchange-based contracts with oil marketing companies in Sierra Leone, it said.

Tanzania

The Ministry of Energy has put in place measures to expand the use of natural gas in the country, the Parliament heard on Monday, May 15. The government also said that the ongoing construction of a gas collection point in Dar es Salaam is in its final stages. Currently, the country is using natural gas in vehicles and factories.  They are planning to spread it to residential use, saying that construction of the facility will make it easy to spread the services as envisioned.

Uganda

The Bank of Uganda (BOU) released its State of the Economy Report for April 2023. Expectedly, the report highlighted that “Owing to tight monetary conditions, liquidity conditions tightened further in the money market, pushing the overnight and 7-day weighted interbank lending rates to the upper bound of the central bank rate (12%) in the quarter to March 2023”. As a result, private sector credit growth declined from 10.29% to 9.73% in the three months to December 2022. “Inflation pressures have started to dissipate although very persistent as labour markets remain tight in several advanced economies.”

On May 19, 2023, the Parliament of Uganda passed the 2023 Appropriation Bill approving UGX 52.74 trillion for the national budget for the 2023/2024 financial year allocating UGX 14.4 trillion and UGX 21.4 trillion towards development expenditure and recurrent expenditure respectively.

The Government has earmarked UGX 1.2 trillion towards various categories of saving and credit co-operative societies (SACCOS) across the country in the budget for the next financial year with the State Minister for Microfinance assuring Ugandans the funding through SACCOS will greatly improve the economic welfare of Ugandans.

President Yoweri Museveni is set to appoint the next governor of the Bank of Uganda (BoU) after receiving a list of names for the coveted job. Finance Minister Matia Kasaija confirmed that the names were forwarded to the President upon recommendations from the cabinet.

Source:  United Bank for Africa PLC