Kampala, Uganda | XINHUA | Uganda’s stock of foreign exchange reserves at end of June 2020 stood at 3.9 billion U.S. dollars, which is equivalent to 5.2 months of future imports of goods and services, the country’s central bank has said.
Adam Mugume, executive director of research Bank of Uganda told Xinhua in an interview on Wednesday that the growth is attributed to the bank’s monetary policy of purchasing the dollar from the domestic money market for reserve build-up.
Earlier this year, the central bank statistics showed the foreign exchanges reserves were at 3.4 billion dollars, equivalent of four months of future imports of goods and services.
According to the Monetary Policy report highlight for August 2020, during the month of July, Bank of Uganda purchased foreign exchange for reserve build-up to a tune of 34.4 million dollars.
Mugume said large international reserves insulate the country from external shocks.
East African countries under their regional body East African Community (EAC) agreed to a minimum reserve target of 4.5 months of import cover. EAC brings together six countries which include, Uganda, Kenya, Tanzania, Rwanda, Burundi and South Sudan.
The monetary policy report also showed that the external sector recorded an overall surplus of 625 million dollars in the financial year 2018-2019, compared to a surplus of 69 million dollars recorded last financial year 2019-2020 which ended on June 30. The fall, according to the bank, is attributed to a weakening of the global demand, disruptions in global supply chains, and a slowdown in domestic economic activity.
The current account deficit improved by 16 percent year-on-year, while trade deficit narrowed to 2.3 billion dollars from 2.8 billion dollars due to larger decrease in imports compared to the slowdown in exports.
Overall, the monetary report showed that the Balance of Payment (BoP) recorded a surplus of 578 million, largely on account of the BoP support from International Monetary Fund (IMF), and budget support loan from Standard Group.
The IMF in May 2020 approved 491.5 million dollars for Uganda to help the country have a strong BoP position.