Strong dollar pushes BoU income to Shs1.4 trillion

Mr Emmanuel Tumusiime-Mutebile, the BoU Governor.

What you need to know:

Paper gain. Government will not get any dividends from the gains.

Kampala. Bank of Uganda (BoU) has recorded a surge in income generated in the financial year 2014/15 as a result of a strong dollar.
In its 2014/15 annual report released recently, BoU’s operating income rose to Shs1.4 trillion up from Shs152.9b in 2013/14.
“The increase in total comprehensive income is a result of the depreciation of the Uganda Shilling that resulted into foreign exchange and fair value gains of Shs1.5 trillion,” the annual report reads.

Paper gain
BoU holds 84 per cent of its assets in foreign currencies and once converted into Uganda Shillings, there are gains. This is because the Uganda Shilling has weakened against all major currencies.
“In 2014/15, BoU made unrealised gains in the region of Shs1.5 trillion on its holdings of foreign exchange, because the depreciation of the exchange rate raised the Shilling value of these foreign currency denominated assets,” Ms Christine Alupo, the director communications BoU told Daily Monitor.

However, these gains are just on paper. Even with the increased income and surplus, government will not get a dividend. The board did not recommend the dividend because of what they termed as the slow recovery in the global financial markets and continued uncertainty of the future income.
“Because this income is unrealised, it cannot be added to the BoU’s capital or general reserves or distributed to its shareholder,” she added.

In real terms, the bank did fall into an operating loss, due to low-interest rates in areas where Uganda’s foreign reserves are invested. According to BoU, interest on the foreign assets used to be 5.2 per cent in 2008 but by 2014, this had fallen to 0.5 per cent.
In 2014/15, the government recapitalised BoU with Shs250b, which also boosted the net worth of the bank. From the recapitalisation, the Central Bank earned the income of Shs35b in 2014/15.
From the annual report, BoU also indicated that foreign reserves declined to $2.88b (Shs9.75trillion) from $3.37b (Shs11.4trillion) due to the Karuma and Isimba projects that required a significant amount of dollars.

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