External debt payments shrink Uganda’s foreign reserves
The Central Bank of Uganda has said that the country’s foreign exchange reserves witnessed a significant decline of about 12% between June 2023 and January 2024.
According to a recent report by the central bank, the decline is attributed to the country's increasing external debt payments and the weakening value of the Ugandan shilling, which has impeded the bank's ability to purchase foreign currency, the East African reports.
The reserves, which stood at $4.07 billion in June, plummeted to approximately $3.58 billion by the end of January, the equivalent of just over three months of import cover, excluding imports related to oil projects.
The Bank of Uganda (BoU) aims to maintain foreign exchange cover equivalent to at least four months of imports, excluding oil projects, as highlighted in an International Monetary Fund staff report released in March.
Uganda's mounting public debt, of which more than half is external, has been a cause for concern, devouring a growing portion of the country's revenues. This has negatively impacted other crucial sectors such as education and healthcare.
"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," the bank stated in the report.
By the end of 2023, total public debt had reached $24.7 billion, with external debt accounting for 60% of the total, according to figures from the Finance Ministry.
