Ugandan Foreign Exchange Reserves Drop 12pc Due to Debt Payments

TUESDAY APRIL 09 2024

Bank of Uganda headquarters in Kampala, Uganda. PHOTO | MORGAN MBABAZI | NMG

Uganda's foreign exchange reserves fell by about 12 percent between June 2023 and January this year because of external debt payments and the central bank's inability to buy foreign currency due to a slide in the Ugandan shilling.

Reserves dropped from $4.07 billion in June to about $3.58 billion at the end of January, reaching 3.4 months of import cover excluding oil project-related imports, the central bank said on Tuesday in its State of the Economy Report.

The Bank of Uganda (BoU) targets foreign exchange cover of 4 months of imports, excluding oil projects, an International Monetary Fund staff report published in March said.

Uganda's rising public debt, more than half of which is external, has been eating up a growing share of revenues and hitting other spending priorities like education and health.

Total public debt stood at $24.7 billion, 60 percent of which was external, at the end of 2023, Finance Ministry figures show.

BoU said foreign reserves could rise due to expected inflows from budget support loans, but that the outlook for the country's balance of payments was fragile.

"Delayed disbursement of expected budget support loans, higher-than-projected government expenditure on imports, and ... tight global and domestic financial market conditions may disrupt the reserve build-up programme," it said.