Uganda’s net foreign assets increased by Shs29 billion in March this year, indicating a gradual influx of foreign currency in the country.
This has relieved the strain on the local currency.
According to the latest data from the Bank of Uganda (BoU), although the assets experienced only a marginal increase during the 12-month review, they have significantly declined since December 2022.
Net foreign assets (NFAs) indicate the difference between its overseas assets and the foreign-owned assets within its borders.
Bank of Uganda holds funds in foreign currencies, primarily those of strategic trading partners, such as US dollars, euros, yuan, rupees, and yen, as part of its foreign assets.
These reserves are used to cover import costs, pay off external debt, or maintain the value of the currency.
“Balancing the net foreign assets position involves managing both foreign assets and liabilities. Fluctuations like these are expected as the country tries to mitigate sudden shocks to the economy that are unique to Uganda rather than being systemic to the global market,” Mr Mustapha B Mugisa, an economic expert, said.
However, Mr Mugisa expressed concern over the short-term decline in Uganda’s net foreign assets from December 2022 to March, as it suggests a weakening ability to pay for imports and service external debts.
In December 2022, the assets experienced a notable surge of Shs807 billion from November 2022. However, they have since declined from Shs1.8 trillion to Shs1.4 trillion as of March.
As of December 2022, approximately 30 per cent [$6.58 billion (Shs24.3 trillion)] of Uganda’s total public debt was denominated in US currency, according to Uganda’s Ministry of Finance’s medium-term Debt Management Strategy (2023/2024).
This situation could potentially impede the country’s access to the US dollar, crucial for external trade.
The value of Uganda’s exports in February was $349.44 million (Shs1.2 trillion), a 13 per cent decrease from the $404.46 million (Shs1.4 trillion) exported in January.
In comparison, during the same period under review, net domestic assets increased by Shs2.233 trillion, from Shs25.949 trillion in March 2022 to Shs28.082 trillion in March 2023.
Worryingly, the Treasury reports that in February, the value of imports of goods increased by 1 per cent to $642.43 million (Shs2.4 trillion) from $636.26 million (Shs2.3 trillion) in January 2023.
“The growth was primarily driven by higher value and volumes of oil-related imports by the private sector during the month. Other private sector imports with notable increases include mineral products (excluding petroleum products), machinery, vehicles and accessories, and vegetable products,” reads a section of the March performance of the economy report.
