KAMPALA: The Ugandan shilling was slightly firmer on Friday, due to the central bank mopping up excess liquidity but was seen under pressure from commercial banks buying the dollar, spurred by the International Monetary Fund cutting economic growth forecasts.
At 0921 GMT commercial banks quoted the shilling at 3,360/3,370, stronger than Thursday's close of 3,375/3,385. "The shilling strengthening is on the back of liquidity mop-up," said Shahzad Kamaluddin, a trader at Crane Bank.
The Bank of Uganda absorbed a total of 266 billion shillings ($79.05 million) worth of excess liquidity from the interbank via a seven-day repurchase agreement.
"But I think the IMF cutting of growth projection will continue to push banks to go long on the dollar," he said.
That interbank demand, Kamaluddin said, will keep some pressure on the local currency.
The IMF has cut its projection for Uganda's GDP growth in 2015/16 (June-July) fiscal year to 5 percent from the previous 5.8 percent, citing the likely impact of tight credit conditions.
Credit flow to the private sector has slowed on the back of a central bank increasing its lending rate by 600 basis points so far this year to 17 percent.
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