Uganda has reported a significant increase in its foreign exchange reserves, which have surged by nearly one-third over the past year. The jump marks a critical milestone for the East African nation’s economic resilience, offering greater capacity to stabilize its currency, manage external shocks, and support future growth initiatives. The Bank of Uganda revealed that reserves now comfortably exceed the three-month import cover threshold recommended by international financial institutions, signaling prudent macroeconomic management amid global volatility.
The sharp rise in reserves is attributed to several contributing factors, including improved export performance, strategic borrowing from multilateral lenders, and a deliberate policy push to accumulate hard currency. Key exports like coffee, gold, and oil-related services have seen rising demand, bolstering Uganda’s balance of payments position. Additionally, disbursements from development partners and IMF facilities provided a cushion during recent global financial tightening cycles, further supporting foreign asset accumulation.
Uganda’s enhanced reserves give the central bank greater flexibility to defend the Ugandan shilling against depreciation pressure, particularly in light of recent fluctuations in global commodity prices and monetary tightening by the U.S. Federal Reserve. Maintaining a stable currency is essential for investor confidence and for managing the costs of external debt servicing, which remains a concern in many low- and middle-income countries.
Policymakers have welcomed the reserve buildup as a sign of growing economic maturity. However, analysts caution that the sustainability of these reserves will depend on continued fiscal discipline, export competitiveness, and careful debt management. Uganda’s economy is still vulnerable to external risks, including commodity price swings and climate-related disruptions to agricultural output, which remains a dominant sector.
Moreover, with infrastructure investments expanding and a growing population to support, the government will face ongoing pressure to deploy resources effectively. Ensuring that reserve accumulation does not come at the cost of domestic investment and social development will be key to maintaining balanced progress. There are also questions around how the reserves will be utilized in future crises—whether through stabilizing the currency, covering import gaps, or supporting counter-cyclical spending.
Uganda’s 33% rise in foreign exchange reserves is a notable achievement that enhances economic stability and strengthens the country’s position in global financial markets. While the increase reflects sound fiscal and monetary coordination, maintaining this momentum will require continued vigilance and adaptability. The reserves offer valuable protection against future external shocks, but the real test lies in using them judiciously to support both short-term stability and long-term development.