Liquid Uganda braces for new bonds in common market

Monetary system

The integrated East African Community presents Kenyan investors with a wider market for investment opportunities.

But in the absence of a converged monetary system however, foreign exchange and currency risks as well as double taxation remain huge stumbling blocks to cross border trades.

A case in point is currency fluctuations in early 2008 as a politically charged environment hit the currency trading markets, moving to unsettle the rhythm of a steadily strengthening Shilling.

This rendered businesses and institutions that operate or obtain funding in foreign currency unable to assess foreign exchange risks, exposing them to massive losses arising from adverse currency movements.

Adoption of a common currency could reduce investors’ exposure to exchange rate risks. But a common currency is far from being adopted in the East African community.

And in the absence of hedging instruments, investors will have no option but to take both interest rate and foreign exchange risk when they seek out investments in the region.