Economists query usefulness of foreign reserves amidst poverty
Posted Tuesday, March 19 2013 at 13:45
Economists have questioned the logic of having billions of shillings saved in a foreign reserve fund while most citizens continue to live in poverty and cannot afford basic services.
Lawrence Bategeka, a senior Research Fellow at Economic Policy Research Centre, says the country has for many years saved money in a foreign reserve managed by the Bank of Uganda but the fund has not improved the status of the citizens. He also questioned the provision of the Petroleum Revenue Management that is contained in the Public Finance Bill that seeks to save oil money in a foreign reserve called Petroleum Revenue Investment Reserve.
Mr Bategeka said it was necessary to invest in the specific needs that would improve the capacity of the citizens to produce services to meet their needs. He further proposed that government channel such funds to creating employment opportunities.
Ezra Suruma, a senior presidential Advisor on Finance and Planning, reiterated Bategeka’s concern, saying it is not necessary for the country to keep billions of shillings in a foreign destination such as New York when the people intended to benefit from the money are helpless.
Mr Suruma, a former Deputy Governor of bank of Uganda who later served as Minister of Finance, Planning and Economic Development, says there are many needy people who could benefit if such foreign reserves were spent on services such as healthcare and education.
Mr Suruma said it was necessary for government to establish social protection measures and provide a standard of life below which no citizen would be left to live in. He also questioned the philosophy of saving for the future, as the provision on oil revenue states, when there were many people who urgently need help from government.
Uganda presently has about 3 billion US Dollars saved in foreign reserves. Kelvin Kizito Kiyingi, Acting Director in charge of Communications at Bank of Uganda, however said the exact amount varies from day to day because of the operations of the bank and the frequent changes in the exchange rate between the dollar and other internationally traded currencies, such as the Euro.
He said the foreign reserves are a buffer primarily used to maintain stability of the exchange rate through purchase or sale of foreign currency, in case of shocks to the balance of payments. The foreign reserves are only kept in the form of safe, liquid assets, such as investment grade sovereign debt instruments and bank deposits.