Uganda Traders Strike over High Bank Interest Rates

12-Jan-2012

The Uganda shilling was little changed against the dollar on Wednesday and traders
awaited the results of a Treasury bill auction and a possible escalation of a strike by traders and shopkeepers.

Bank of Uganda (BoU) is later today due to release results of Treasury bill auction worth 110 billion shillings ($44.8 million) of different maturities.
Traders and shopkeepers across the Ugandan capital Kampala and other towns shuttered their businesses for three days
beginning Wednesday to protest high interest rates charged by commercial banks.

At 1037 GMT commercial banks in Kampala quoted local
currency at 2,450/2,460, the same as Tuesday's close.

"The market is more or less stable and traders are holding
their cards waiting to see whether the auction will be heavily
oversubscribed and the level of offshore participation," said
Ahmed Kalule, dealer at Bank of Africa.

"The strike by traders could also unnerve the markets if it
escalates because some of the traders do buy forex so their
absence from the market might have some impact."

The traders are demanding that commercial banks stop hiking
interest rates on old loans, an action commercial banks say is
impossible because they have to raise rates to accommodate the
high cost of money.

A tight monetary policy has helped the currency of one of
Africa's leading coffee producers to recover 15.4 percent from its record low of 2,901 hit on Sept. 23.

The central bank raised its Central Bank Rate (CBR) for four
consecutive months from August last year but paused the policy
tightening in December after inflation started easing.

The bank has left the CBR unchanged for December and January
at 23 percent following successive slowdowns in the country's
inflation in November and December.

"We're waiting to see the results of the auction and I think
we're likely to see a firmer direction for the shilling after
they (results) are in," said Faisal Bukenya, head of market
making at Barclays Bank Uganda.

Reuters