The weakness of the Ugandan shilling has become a matter of growing concern in recent weeks, and in January the Bank of Uganda (BoU, The central bank) started to sell foreign exchange aggressively in an attempt to stabilise the currency. The shilling depreciated by 15% during 2010, and though most of the losses came during the first half of the year, the downward trend quickened at the start of 2011 and the currency fell to an all-time low of USh2,400:US$1 in mid-January. The BoU has since adopted a more hardline policy stance; officials insisted in November that the bank was more concerned with currency volatility than with protecting any particular exchange rate. However, it made large interventions in the foreign-exchange markets in January, and officials now say that they would be happy with a rate below USh2,300:US$1.

Economic conditions have played a large role in the currency's weakness, but political uncertainty-with elections approaching on February 18th-has also been a large factor. According to the bank, the causes of the shilling's difficulties lie in a combination of uncertainty in global financial markets, low export earnings and strong demand for US dollars in the energy sector. The euro area's weakness has certainly had an impact on the shilling; the euro zone traditionally buys around one-quarter of the country's exports, and low demand there means that Uganda is earning less foreign exchange, adding to depreciation pressures. This has been exacerbated by slowing demand growth in Southern Sudan, a major destination of exports. In addition, donors have postponed aid disbursements, nervous that funds could be siphoned off for electioneering as voting approaches.