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Currency refers to a system of money in general use in a particular country. In Uganda the acceptable local currency is the Ugandan shillings, we also have various international currencies with the major one being used for internal and external trade
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    Currency refers to a system of money in general use in a particular country. In Uganda the acceptable local currency is the Ugandan shillings, we also have various international currencies with the major one being used for internal and external trade being the United States dollar.1 US Dollar is equivalent to 3550 UG SHS. Currency depreciation   refers to the loss of value in the country’s currency with respect to foreign currencies as a result of force of demand and supply in free floating exchange rate. The following are the reasons for the currency depreciation ;  Inflation  ,it occurs when the general price of goods and services in the country increase.it causes the value of the currency depreciate hence reducing in purchasing power especially rampant inflation caused by printing more money hence hindering the economic growth and development.   Monetary policy , the central bank in Uganda establish monetary policies that cause immediate reduction in currency value contribute to long term trends .in general ,when a country raises its interest rates to combat inflation ,it exerts pressure on its currency for example interest rates control to intentionally drive down the relative value of their currencies in the global market. Demand in international currencies ; the government may prefer foreign currency with aim of  paying government international obligation like constructing roads this increase foreign currency in supply and hence leading to fall in country’s currency and long run growth and development   Supply and demand , the principal of supply and demand apply to depreciation of currency value. If a country injects anew currency in its economy, it increases money supply causing less demand and hence depreciates the value of the currency leading to low also economic growth. Trade deficit  ,a countries currency deficit means that a country import more goods and services that are more than its exports and to finance this deficit they will require surplus on the financial capital account thus hindering the countries growth and development. Political instability  ,in general, fear of uncertainty about countries political stability may lead to currency depreciation ,such as wars which are potentially trigger as speculations consider investments a country will have to make for long war hence hinders economic growth and development of the country. Price of the commodity ; if an economy depends on export of raw materials, a fall in the price of such raw materials can cause a fall in revenue and depreciation in exchange rate e.g. in 2011 a ton of coca cola sold for us$ 4000 per ton currency it is going for us$2300per ton causing low in flow of dollars. Heavy government debts ; when there is heavy debt burden the government may instruct central  bank to print more money; the increase in money supply reduces the value in foreign exchange rate.    Economic Systems are the means by which countries and governments distribute resources and trade goods and services. They are used to control the five factors of production, including: labor, capital, entrepreneurs, physical resources and information resources. There are majorly four types of economic systems worldwide; traditional economy, market economy, command economy and mixed economy. In Uganda we operate under a market economic system. Economic growth and development refers to an increase in the economies GDP per capita income which enables improvement in the life expectancy rate, infant mortality rate, literacy rate and poverty rates of individuals in the economy. To be able to understand the economy system we are operating in in Uganda helps us understand the impact of fall in value of local currency to the growth and development in Uganda. Effect of fall in value of local currency towards growth and development of Uganda: Inflation,  where a country relies on imported goods for example motor vehicles which are relatively more expensive leads to increase in the countries out flow which is more than capital inflow in terms of foreign exchange hence hindering countries economic growth and development. Currency depreciation brings about low incomes, as Uganda’s export vary little because of the loss in value of its currency which makes production more costly thus reduction in the capital inflow and yet imports also tend to be expensive leading to balance of payment deficit hence affecting the growth and development of the country. Increases in unemployment levels in Uganda, as it discourages investors both local and foreign from investing in different sectors within the country which has been a major cause for unemployment which hinders the growth and development of the country. Income inequalities ; where by foreign investors are paid higher wages than the local ones making some people richer than the other i.e. some being able to get better services than others leaving them undeveloped hence hindering the growth of the country. Currency depreciation has caused brain drain . Professional workers decide to leave the country and apply their knowledge and skills in foreign countries as a result of loss of value in currency within their country leaving unskilled individuals thus affecting the growth and development of the country. Rise in domestic prices due to currency depreciation has brought about a fall in consumption of locally produced goods hindering the growth of sectors like agricultural, industrial among others as a result of low value of currency as people fail to purchase highly priced goods from such sectors hence affecting the development of the country. Currency depreciation leads to decreased foreign investment  leading to increase in capital outflow as business men prefer to invest outside the country where currencies have got more    value and business projections have more certainties. Hence affecting the growth and development of the country. Currency depreciation has led to over exploitation of domestic resources .for example forests, swamps have been cut down, over fishing in water bodies as a way of trying to increase the level of income so that local people are in position to purchase their necessities which appear expensive as a result of depreciation hence affecting the development of the country. Currency depreciation leads to low standard of living  .This is because much of the money is spent on the consumption as a way of maintain the standards of living, leaving behind little or nothing to save. This lowers the level of economic growth and development of the country. It leads to fall in real wages  .this is because currency depreciation is as a result of inflation and when th e country’s currency value depreciates the wages remain constant hence bring about a fall in standards of living of Ugandans. The following are some of the measures that can be taken to improve in the value of Ugandan Shs against US Dollar. Restrictive monetary policy , this involves the use of various monetary tools to reduce money supply and cuts down people’s purchasing power thus increasing margin requirement and selective credit control. Advertisement ; the government of Uganda can improve in marketing and advertising the image of the country globally, it can do this by promoting its different economic sectors like tourism,  by doing so more investors will be attracted in investing in the country and hence bring about foreign capital into the economy which will in turn improve the value of the local currency. Export promotion , this is the deliberate policy to increase export production through providing subsides to producers increasing producers price hence encouraging foreigners to buy the commodities thus leading to economic growth and development. Provision of investment intensives e.g. tax holidays, tax exemptions etc. ,this encourages and attracts investors leading to more productions of goods and services sold at stable prices which intends to increase the value of exports leading to growth and development of the economy. Improvement of balance of payment position , the reduction of imports means the reduction of foreign expenditure which may result into improvement of balance of payment position of the country hence increasing economic growth and development.  Foreign exchange control  ,this is where the government puts regulations to control the foreign exchange market which can be done by fixing official exchange rate, controlling inflow of foreign exchange prioritization in allocation of foreign exchange resulting into a stable exchange rate.    Diversifying of the economy , this is being done to reduce over dependence on agriculture through having diversified economic activities in different sectors and this generates more employment opportunities. Depreciation in value of Ugandan Shs in Comparison to the US Dollar is a reversible process which needs strategic effort by both the government in terms of policies and also the Ugandans at large. Currency refers to a system of money in general use in a particular country. In Uganda the acceptable local currency is the Ugandan shillings, we also have various international currencies with the major one being used for internal and external trade being the United States dollar.1 US Dollar is equivalent to 3550 UG SHS. Currency depreciation   refers to the loss of value in the country’s currency with respect to foreign currencies as a result of force of demand and supply in free floating exchange rate. The following are the reasons for the currency depreciation ;  Inflation  ,it occurs when the general price of goods and services in the country increase.it causes the value of the currency depreciate hence reducing in purchasing power especially rampant inflation caused by printing more money hence hindering the economic growth and development. Monetary policy , the central bank in Uganda establish monetary policies that cause immediate reduction in currency value contribute to long term trends .in general ,when a country raises its interest rates to combat inflation ,it exerts pressure on its currency for example interest rates control to intentionally drive down the relative value of their currencies in the global market. Demand in international currencies ; the government may prefer foreign currency with aim of  paying government international obligation like constructing roads this increase foreign currency in supply and hence leading to fall in country’s currency and long run growth and development   Supply and demand , the principal of supply and demand apply to depreciation of currency value. If a country injects anew currency in its economy, it increases money supply causing less demand and hence depreciates the value of the currency leading to low also economic growth. Trade deficit  ,a countries currency deficit means that a country import more goods and services that are more than its exports and to finance this deficit they will require surplus on the financial capital account thus hindering the countries growth and development. Political instability  ,in general, fear of uncertainty about countries political stability may lead to currency depreciation ,such as wars which are potentially trigger as speculations consider investments a country will have to make for long war hence hinders economic growth and development of the country.    Price of the commodity ; if an economy depends on export of raw materials, a fall in the price of such raw materials can cause a fall in revenue and depreciation in exchange rate e.g. in 2011 a ton of coca cola sold for us$ 4000 per ton currency it is going for us$2300per ton causing low in flow of dollars. Heavy government debts ; when there is heavy debt burden the government may instruct central  bank to print more money; the increase in money supply reduces the value in foreign exchange rate. Economic Systems are the means by which countries and governments distribute resources and trade goods and services. They are used to control the five factors of production, including: labor, capital, entrepreneurs, physical resources and information resources. There are majorly four types of economic systems worldwide; traditional economy, market economy, command economy and mixed economy. In Uganda we operate under a market economic system. Economic growth and development refers to an increase in the economies GDP per capita income which enables improvement in the life expectancy rate, infant mortality rate, literacy rate and poverty rates of individuals in the economy. To be able to understand the economy system we are operating in in Uganda helps us understand the impact of fall in value of local currency to the growth and development in Uganda. Effect of fall in value of local currency towards growth and development of Uganda: Inflation,  where a country relies on imported goods for example motor vehicles which are relatively more expensive leads to increase in the countries out flow which is more than capital inflow in terms of foreign exchange hence hindering countries economic growth and development. Currency depreciation brings about low incomes, as Uganda’s export vary little because of the loss in value of its currency which makes production more costly thus reduction in the capital inflow and yet imports also tend to be expensive leading to balance of payment deficit hence affecting the growth and development of the country. Increases in unemployment levels in Uganda, as it discourages investors both local and foreign from investing in different sectors within the country which has been a major cause for unemployment which hinders the growth and development of the country. Income inequalities ; where by foreign investors are paid higher wages than the local ones making some people richer than the other i.e. some being able to get better services than others leaving them undeveloped hence hindering the growth of the country. Currency depreciation has caused brain drain . Professional workers decide to leave the country and apply their knowledge and skills in foreign countries as a result of loss of value in currency within their country leaving unskilled individuals thus affecting the growth and development of the country.
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