02nd May – 08th May 2020: Weekly financial markets review and outlook with Stephen Kaboyo The Uganda Shilling to gain from the news that the IMF is disbursing USD491.5 million (UGX1.87 trillion) to assist Uganda deal with Covid-19 related challenges to the economy.

The UGX closed the week steady riding on the positive sentiment generated by the news of IMF disbursement designed to assist the country deal with the economic effects of Covid-19.

Trading was in the range of 3795/3805.

Yesterday, Wednesday, May 6th IMF announced that it had approved a disbursement to Uganda of USD491.5 million (UGX1.87 trillion) under the Rapid Credit Facility (RCF) to help deal with the effects of Covid-19.

(CEO East Africa understands that USD350m will be used support Balancing of Payments- to buffer up foreign reserves at Bank of Uganda to a five and half months level while USD150m will go to budget support for health, social protection and Uganda Development Bank (UDB)).
In the shilling interbank money market overnight funds dropped to 5% while one-week funds held at 5.5%- the lowest level in the recent past, an indication of low lending activity amongst the banks Market Watch for the week ending 8th May 2020 and Outlook for the upcoming week.

UGX closed the week steady riding on the positive sentiment generated by the news of IMF disbursement designed to assist the country deal with the economic effects of Covid 19. Trading was in the range of 3795/3805.

In the shilling interbank money market overnight funds dropped to 5% while one-week funds held at 5.5%, the lowest level in the recent past, an indication of low lending activity amongst the banks.

In the fixed income market, a treasury bill with UGX145 billion on offer was conducted. The amount was significantly lower than usual. Yields slightly dropped to 8.771%, 11.001%, and 12.500% for the 91,182 and 364-day tenors. The market uptake was high as reflected in the bid to cover ratios of 2.11, 4.14, and 2.56.

In the regional markets the currencies of Kenya and Tanzania exhibited stability, with the Kenyan Shilling supported by diaspora flows amid a weak dollar demand in the local market, while in Tanzania both demand and supply were evenly matched.

Global markets continued to be ruled by the theme of flocking to certainty. The market dynamics supported the US dollar to ascend to a two-week high against all major currencies on safe-haven bids in the wake of a dire global situation.

Outlook indicates that the shilling will continue to garner support in the coming weeks from the positive news of the IMF loan disbursement although expected with a lag, but will boost the dollar reserve position and keep markets confidence high. .

In the fixed income market, a treasury bill with 145 billion on offer was conducted. The amount was significantly lower than usual. Yields slightly dropped to 8.771%, 11.001% and 12.500% for 91,182 and 364 day tenors. The market uptake was high as reflected in the bid to cover ratios of 2.11, 4.14 and 2.56.

In the regional markets the currencies of Kenya and Tanzania exhibited stability, with KES supported by diaspora flows amid weak dollar demand in the local market, while in Tanzania both demand and supply was evenly matched.

Global markets continued to be ruled by the theme of flocking to certainty. The market dynamics supported the US dollar to ascend to a two week high against all major currencies on safe haven bids in the wake of dire global situation.

Outlook indicates that the shilling will continue to garner support in the coming weeks from the positive news of the IMF loan disbursement although expected with a lag, but will boost the dollar reserve position and keep markets confidence high.