Increased earnings from commodity exports have helped Uganda to record a surplus on its balance of payments of Ush790 billion ($222 million) in the quarter first quarter of the year ending February 2017.
Bank of Uganda said the surplus helped to boost the country’s foreign exchange reserves by a considerable margin.
The Central Bank's monetary policy report released last week, puts the total stock of Uganda’s foreign exchange reserves at Ush11 trillion ($3.17 billion), an equivalent to 4.3 months of future imports of goods and services.
This implies that the country can withstand exogenous shocks that may occur in the economy.
The executive director of research at BoU, Dr Adam Mugume, said last week: “There were increased earnings in coffee and gold exports that contributed to the surplus in Uganda’s balance of payment.”
Despite the positive developments in the country’s balance of payments, the Central Bank cautions that in the short to medium term, the current account deficit may come under pressure from expected dividend payments which may be moderated by increased export receipts following the end of the dry season.
Other developments show that the services account balance deteriorated by $27 million to a deficit of $152 million on quarter-to-quarter basis, largely due to a $16 million decrease in receipts for other business services.
The report also shows that net inflows (liabilities) through the Financial Account increased by 41 per cent q-o-q to $376 million mainly driven by developments in portfolio and other investments.
The BoU statistics show that portfolio investment recorded a net outflow (asset) of $149 million ($5 million in the quarter), due to a $126 million decrease in holdings of Uganda government debt securities by non-residents.
“Inflows through the financial account may increase due to project support loans to support the infrastructure and energy related projects and increased Foreign Direct Investment inflows,” said the central bank in the monetary policy report.