The Government of Uganda cannot set a fixed exchange rate for purposes of tax collection, finance minister, Maria Kiwanuka said on Friday.
The minister was reacting to the traders? call to have the exchange rate fixed at sh2,000 per dollar for customs tax assessment.
?The Government thinks this is not appropriate,? Kiwanuka said in a statement to Parliament on the depreciation of the shilling against the major foreigncurrencies.
The statement followed demands by MPs that the Government comes up to explain the financial situation and steps being taken regarding the traders? strike last week.
The minister explained that the sh2,000 was the April 2009 import tax assessment rate.
?Ideally, this would mean that traders would have to sell their imported goods to the public at the prices of two years ago.
?The price manipulation is neither feasible nor possible in an open market economy,? she said.
Kiwanuka observed that at the same rate, the Government would be subsidising traders by about sh500 for each dollar and yet this would not be translated into price reduction for consumers.
?Moreover, some estimates indicate that traders under Kampala City Traders Association import mainly consumption goods,? Kiwanuka pointed out.
She attributed the depreciation of the exchange rate to global, regional and domestic factors. Amelia Kyambadde, the trade and industry minister, said the current exchange rate movements are a boost to the export performance.
She said there was need to strike a balance between export and import performance in managing exchange rate movements.
Kyambadde said her ministry had prioritised in addressing the issues raised by the traders including promotion of small-and-medium enterprises, facilitation of the arbitration committee to handle difficulties that the business community face in South Sudan and clamping down on illegal immigrants.
She clarified that trading licenses had not been suspended, but would be reviewed.
By Joyce Namutebi and Cyprian Musoke: The New Vision Newspaper