Uganda's foreign exchange reserves have risen by $139.5 million, following improvements in the country's overall balance of payment. This brings it closer to the benchmark set by the East African Community for monetary stability.
In its Monetary Policy report of February 15, the Bank of Uganda said that the overall balance of payments resulted in a surplus of $139.9 million in the quarter ended December 2016, leading to a net build-up in reserves of $139.5 million.
"The stock of reserves at the end of December 2016 was $3.02 billion (4.5 months of future imports of goods and services)," said the executive director of research at BoU, Adam Mugume.
EAC requires its members to have reserves that can keep the economy going for at least four months in line with international trade obligations.
Dr Mugume said that increased earnings from coffee exports have boosted the country's foreign exchange reserves.
In the last quarter of 2016, the goods account deficit improved from $397 million to $228 million due to increased receipts from exports and decreased expenditure on imported goods, BoU data shows. Similarly, the services account balance improved from a deficit of $163 million to $97.3 million largely due to a $108.7 million decline in payments for other business services.
Trends in the computed statistics show that the overall balance of payments had a deficit of $2 million in the quarter ended October 2016, leading to a net drawdown in reserves of $2 million, while the stock of reserves stood at $2.86 billion which can cover 4.3 months of future imports of goods and services.
The central bank said that the level of foreign exchange reserves has helped to contain depreciation pressures on the shilling. The shilling depreciated by 7.0 per cent in December 2016 and by 4.6 per cent in January this year, to an average midrate of Ush3,609.48 per dollar.
"The current relative stability of the shilling is largely driven by subdued corporate dollar demand coupled with continued inflows from NGO remittances and stronger export proceeds," said BoU in its monetary report.