Uganda’s Foreign Exchange Reserves Decline 4.3%

Uganda’s foreign exchange reserves decreased by 4.3% in the three months leading to the end of July, continuing a recent downward trend, according to a report released by the central bank on Wednesday. As of July, the reserves stood at $3.3 billion, sufficient for approximately three months of imports, down from $3.5 billion at the end of April.

The Bank of Uganda attributed the decline to several factors, including increased external debt service payments, difficulties in securing external loans at favorable terms, and limited foreign exchange purchases. In response, the central bank has begun purchasing gold to bolster and diversify its reserves.

“The reduction in reserve assets highlights the urgent need for improved public debt management and strategies to enhance foreign exchange inflows,” the bank stated. Although Uganda’s public debt remains sustainable, it is considered to carry a “moderate risk of debt distress,” necessitating careful planning to mitigate potential vulnerabilities.

Looking ahead, the economy is projected to grow between 6.0% and 6.5% in the 2024/25 financial year, supported by increased private sector investment and the anticipated start of oil exports next year.