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Uganda’s foreign exchange reserves decrease by 12%

Uganda’s foreign exchange reserves have seen a significant decline of 12% between June 2023 and January this year.

This decrease, from $4.07 billion to about $3.58 billion, has raised concerns about the country’s ability to meet its import requirements and maintain financial stability.

According to the central bank’s State of the Economy report, the decrease in foreign reserves can be attributed to external debt payments and the weakening Ugandan shilling, which has made it difficult for the central bank to purchase foreign currency.

The Bank of Uganda aims to maintain a foreign exchange cover of 4 months of imports, excluding oil project-related imports.

Uganda's foreign exchange reserves decrease by 12%
Uganda’s foreign exchange reserves decrease by 12%

However, with reserves now at 3.4 months of import cover, there is a growing worry about Uganda’s financial resilience in the face of economic challenges.

Uganda’s mounting public debt, with more than half being external, has put further strain on the country’s finances. Total public debt stood at $24.7 billion at the end of 2023, with external debt accounting for 60% of the total.

This increasing debt burden has limited government spending on essential sectors like education and health.

While the central bank anticipates an increase in foreign reserves from expected budget support loans, the outlook for the country’s balance of payments remains uncertain.

Factors such as delayed loan disbursements, higher government expenditure on imports, and volatile global financial conditions could hinder efforts to rebuild reserves.


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