Kampala—Uganda's tiny economy is locked in a life and death struggle with the US dollar. The exchange rate has been falling relentlessly for three months and the shilling now exchanges for no less than 1,800 to a dollar, from selling at Ush1,550 a dollar in June.
In other words, the Uganda shilling is falling at a rate of 5 per cent per month against the dollar. In the past, prices of all goods in the market would have risen accordingly.
They haven't, with the exception of petroleum products. Fuel alone has tried to keep up with the conspiracy to make the Ugandans' earnings lose their value. But then the fuel dealers have to contend with rising crude prices in the international market. The question of fuel is a double tragedy because not only is it more costly in dollars out there, but with every passing day you need more shillings to buy the dollar. So the pump prices keep going up.
The other day, the government decided to exonerate itself of blame for the situation and went public with a breakdown of petrol prices. The general assumption had been that the government was taking away half the pump price in taxes.
That was indeed the case two years ago, but it is so no longer. The tax was at Ush580 a litre when the pump price was Ush1,000. It has remained at Ush580 a litre while the price has risen to Ush1,500. In other words, the government has resisted the temptation to take a fixed percentage, and has been content to watch its cut take a beating as the price rises.
The dollar havoc is being felt in all sectors. As it knocks down the shilling, the problem becomes partly psychological. The big earners like communications and fuel companies are in a hurry to convert their revenues into dollars, thereby pushing its price higher.
To add to the already complicated scenario, there aren't enough Uganda shillings to go round. This may explain why prices have not responded as quickly to the shilling's decline as they would have in the past.
Of course, 10 years ago, almost every consumer product except food was imported. But today even the prices of those goods and services—like transport and newspapers—that rely heavily on imported inputs have not risen as one would have expected. Newspapers have not raised their cover price at all.
When President Museveni took power 14 years ago, he was irked by the
way the economy was
enslaved by the dollar. He made it his
mission to free the country from the dollar's domination while at
the same time participating in world trade.
He devised a modern form of dollar-free trade but unfortunately simply
called it barter. It involved balancing accounts with the
country's trading partners. Detractors of course tried to make it
look crude—what with the name
involved sophisticated protocols and was not limited to socialist
partners like Cuba and Tanzania. Hefty barter deals were conducted
with France, for example, involving the exchange of vehicles for
coffee. But in the end, when it signed on afresh to the structural
adjustment programmes, Uganda was
encouraged to discontinue
these dollar-free barter deals, including some that were in the
Come the 1990s, the dollar was already becoming the accepted second currency of the country, with many invoices, especially rent, quoting prices only in dollars.
By the middle of 2000, the dollar embrace had become so tight, it was
choking the life out of the shilling. It now looks like we have to go
back to the drawing board. Coffee and fish have let us down.
We have to earn more dollars one way or another. The increased local
production of daily necessities has helped to prevent prices from
shooting up after the dollar through the roof. But how much longer can
we hold out? The first resistance against dollar
lasted two years and we gave in. Today, we must either make more
dollars or come up with another original idea.