The Bank of Uganda has warned that the heightened uncertainty in the financial markets due to sanctions on Russia could weaken the Ugandan shilling.
In the monetary policy statement for April, the Bank’s Deputy Governor Michael Atingi-Ego says advanced economies are expected to tighten conditions to contain escalating inflation.
This he says drive financial flows from frontier markets like Uganda to the safe haven US Dollar assets hence weakening the shillings exchange rate.
The US, EU, UK, Japan, Canada among others have all put sanctions against Russia that target banks, military exports and Oil refineries.
He meanwhile adds that global commodity and fuel prices are also expected to go higher due to the worsening Russia-Ukraine conflict.
The deputy governor meanwhile gives government assurance to closely track inflationary developments and give appropriate action where necessary.
He says they will do everything possible to ensure inflationary expectations remain contained.
The central bank has since projected that in the medium term, inflation will slightly be above the 5% target.
