Rigotnomics: Will the global financial crisis hit ordinary Ugandans?

Nov 2, 2008

Dick explains why the answer is yes here.

Dany Jaimovich - Bakary Baludin said...: Thanks to PL for linking this post in Rigotnomics.

I share must of Dick's concerns but a crucial point is missed: exchange rates. For what I read, Uganda has a floating ER system, so a consequence of the crisis should be a, probably large, depreciation of the Ugandan Shilling (at least in Chile depreciation has been around 40%). This is good and bad.

Good because the negative effects of the crisis on remittances should be smaller (and even positive), same for exports, compensating part of the fall in commodity prices and maybe promoting some export diversification.

The bad side of depreciation is that liabilities in foreign currency, as most of public debt in Uganda might be, increase proportionally to the rise in ER, imposing a big public and private debt burden. Also, imported goods get very expensive, and I can imagine Uganda's economy might be dependent in some basic foreign products.

Let's hope that, for once, the North will suffer more than the South (and, in both places, the rich more than the poor).... power to the South!!!; November 2, 2008 at 12:55 PM