Mop-up liquidity in Uganda's money markets as Kenyan shilling firms up

The East African region has been abuzz with financial news, particularly in Kenya and Uganda, as the currencies in these countries experience contrasting trends. According to the Central Bank of Kenya Weekly Bulletin, the Kenyan shilling has strengthened by 1.06% against the US dollar, reaching Ksh128.66 from Ksh130.04 the previous week. This marks a significant 17.8% year-to-date increase for the Kenyan currency. On the other hand, Uganda has been facing challenges in its money market liquidity following the announcement of the budget last week, driven by interbank and corporate dollar demand. As the region navigates through these financial developments, Carol Nampurira, Corporate Sales Manager at Stanbic Bank Uganda, sheds light on the situation in a recent interview with CNBC Africa. Nampurira delves into the implications of the Kenya finance bill controversies, the factors contributing to the strength of the Kenyan shilling, and the money market liquidity conditions in Uganda. The Kenya finance bill, which aimed to raise approximately 3.34 billion in revenue for the financial year 2024-2025, has encountered setbacks due to rejected proposals. These included amendments such as VAT on bread, motor vehicles, and financial services. The rejection of these proposals leaves a revenue gap of about 150 billion, prompting the government to explore alternative funding solutions such as debt swaps or bonds. Nampurira highlights the positive sentiment surrounding the Kenyan currency, attributing its strength to factors like horticultural flows, diaspora remittances, and support from tea exports. Additionally, the repayment of the Eurobond and a new funding approval from the World Bank have bolstered the Kenyan shilling. Nampurira expects liquidity conditions to remain stable, with muted demand due to the positive market outlook and adequate dollar supply. Turning to Uganda, Nampurira discusses the central bank's approach to managing money market liquidity through measures like the seven-day repo and open market operations. Despite fluctuations in liquidity levels, she anticipates that the market will maintain its current stability, with the central bank effectively addressing any imbalances. The contrasting financial landscapes in Kenya and Uganda underscore the importance of monitoring currency movements, liquidity conditions, and policy responses in the East African region. As stakeholders navigate through economic challenges and opportunities, staying informed and proactive will be key to ensuring financial resilience and stability in the face of ongoing market dynamics.