What you need to know:
- As of June foreign exchange reserves increased to $4.074b and are expected to increase to $4.4b by June 2024
Bank of Uganda (BoU has indicated that Uganda’s foreign exchange reserves increased to $4.074b in June, which covers four month of imports of goods and services.
The increase, the Central Bank said, followed a rise in purchase of dollars from the domestic money market, noting that by the end of June it had purchased $250m from the domestic money market in a bid to rebuild the country’s exchange reserves.
The reserves are, however, expected to grow further to at least $4.4b, which would be equivalent to 4.03 months of import cover by June 2024.”
Uganda’ foreign exchange reserve had reduced to $3.6b due to a number of factors, including growing debt servicing and repayment, amid a difficult economic environment globally and domestically.
However, the reserves later increased to $3.8b in late 2022.
In a follow up monetary policy statement Bank of Uganda also noted that in the three months to July, liquidity conditions had eased due to maturity of different government securities and purchases of forex for reserve buildup, which led to declines in interbank rates.
However, lending rates continued to rise in the quarter to June, reflecting the tight monetary conditions, which forced interest rates to rise to 19.2 percent from 19.18 percent in the quarter that ended March.
The current account deficit also widened to $3.7b (7.5 percent of gross domestic product) while the financial account surplus expanded by 9.1 percent to $3.2b in June.
During the period, Bank of Uganda also recorded an increase in foreign direct inflows boosted by oil-sector-related investment and higher budget support inflows but outflows persisted with net exit amounting to $617.3m, which was higher than a net exit of $273.7m the period ended June 2022.
The Central Bank also noted that lower project support disbursements and high debt service repayments had resulted into an overall balance of payments deficit of $53.1m in the 2022/23 financial year, which was a reversal from a surplus of $191.3m in the 2021/22 financial year.