As the Western world continues to digest the implications of Britain’s exit from the European Union, there are concerns that the developing world will equally be affected in many unforeseen ways.
Development Economist Mr.Fred Muhumuza says this impact on developing countries like Uganda will be both short and long term.
Already the pound is on a downward spiral, losing to major global currencies like the Dollar and Euro.
Mr.Muhumuza warns that if the pound continues to lose value while the dollar gets stronger, it will have dire consequences for weaker currencies like the Ugandan shilling, which will in turn push inflation upwards, leading to a possible contraction in the economy.
A 2014 World Bank report shows that Uganda receives at least $287million in remittances.
Mr.Muhumuza warns that this figure is like to drop since foreign exchange inflows will most likely be affected.
“Being a small economy that might affect us in terms of forex inflows and this will continue to put pressure on the Uganda shilling to depreciate”, says Mr. Muhumuza.
Experts also warn that in the event of a recession the British government will have less revenue from taxes and will be forced cut back on foreign aid to developing countries.
Following Friday’s Brexit vote, Ugandan exporters are worried about the re-establishment of trade ties on inter-country basis.
According to statistics from the Uganda Export Promotions Board, 23% of Uganda’s exports go to the European Union, Britain being one of the specific destinations.
The executive director Uganda Export Promotions Board Mr. Elly Twineyo tells KFM that Uganda will have to re-negotiate its trade arrangements including the Economic Partnership Agreements as well as unilateral offer on everything except arms and this will have direct impact on the preferential certificate of export required by all exporters.
“What this mean with the pulling out of from the EU there could be negotiations on the quotas the thresholds but also we have a bilateral arrangement with British alone. We have not calculated the potential losses that could be suffered but this surely bound to affect our exporters”, Mr. Twineyo explains.
The UK prime minister will discuss the implications of the Brexit vote and the way ahead at an EU summit in Brussels.
German, French and Italian leaders said yesterday that there could be no “formal or informal” talks on a British exit at this stage.
Meanwhile, Chancellor George Osborne has ruled himself out of replacing Mr Cameron as prime minister.
Story By Judith Atim
