Brexit Will Have Negative Financial Impact on Uganda – Experts

2320 Views

In short
According to Stephen Kaboyo from Alpha Capital Partners, the volatility in global financial markets as a result of Brexit will trigger capital outflow as investors dump riskier assets and move into dollar assets which is seen as safe haven.

A number of experts say the decision by Britain to exit from the European Union (EU) will have broad negative effects on Uganda.
 
Stephen Kaboyo of Alpha Capital Partners says while at the moment it is difficult to quantify, there are going to be ripple effects that will trickle down and affect Uganda.
 
According to Kaboyo, the volatility in global financial markets as a result of Brexit will trigger capital outflow as investors dump riskier assets and move into dollar assets which is seen as safe haven.
 
This movement, adds Kaboyo, will result in the depreciation of the Uganda Shilling and other Sub-Saharan Africa currencies.
 
The Uganda Shilling has lost almost 100 Shillings since last week when the Brexit referendum was held. The British Pound plunged from 4,900 Shillings in the buy side down to an average of 4,400 Shillings.
 
As if to cash in, the Pound held high at 5,000 Shillings on the sell side, pointing to dealers wanting to cash in from those holding the Pound.
 
Most market players, says Kaboyo, are holding dollar positions for now uncertain of how the Pound will perform.
 
Interestingly, after a week of turbulence, the Pound has rallied on the global financial markets, clawing back about four percent from the over 10 percent downfall after the leave win.
 
Kaboyo  says the timing of Brexit is not good as most countries are facing external shocks such as fall of commodity prices, slowdown in China and higher external borrowing costs, among other factor. This is likely lead to further volatility.
 
Other implications are weaker trade ties, reduced British outward-ness which will be seen through reduced external development assistance.
 
Kaboyo says in the event that the UK goes into a recession, this will affect diaspora remittances which averages one billion dollars, the second most revenue source after tourism.
 
Prof. Augustus Nuwagaba, from Reev Consults International, says a weak Pound will also affect Uganda's exports to the UK because the earnings would reduce.
 
According to Prof. Nuwagaba, Uganda should focus on goods with inelastic demand so that whatever changes in prices occur, whether in the UK or globally the country's exports do not suffer.
 
Britain being Uganda's colonial master has its economy delicately linked to Uganda, including in the financial sector.

 

About the author

David Rupiny
In his own words, David Rupiny says, "I am literally a self-trained journalist with over 12 years of experience. Add the formative, student days then I can trace my journalism roots to 1988 when as a fresher in Ordinary Level I used to report for The Giraffe News at St Aloysius College Nyapea in northern Uganda.


In addition to URN for which I have worked for five years now, I have had stints at Radio Paidha, Radio Pacis, Nile FM and KFM. I have also contributed stories for The Crusader, The New Vision and The Monitor. I have also been a contributor for international news organisations like the BBC and Institute for War and Peace Reporting. I am also a local stringer for Radio Netherlands Worldwide.


I am also a media entrepreneur. I founded The West Niler newspaper and now runs Rainbow Media Corporation (Rainbow Radio 88.2 FM in Nebbi). My areas of interest are conflict and peacebuilding, business, climate change, health and children and young people, among others."