Uganda's forex reserves rise by $139mn

Uganda's foreign exchange reserves have seen a significant increase of $139 million, driven by a surge in earnings from coffee exports. The Bank of Uganda reported that the country's foreign exchange reserves now stand at 4.5 months of import cover, attributing the rise to the influx of revenue from the coffee sector. Elton Mutiso, Director at Huchi Capital, shed light on the dynamics behind this notable shift in Uganda's economic landscape. Mutiso highlighted the impact of a capital gains tax win against Palo Oil, bringing in an additional $435 million to Uganda's coffers. While Uganda has only received a fraction of this amount, a portion has been allocated to boosting import cover, contributing to the significant rise in forex reserves. Mutiso emphasized that the growth in reserves cannot be solely attributed to coffee exports, pointing out the strategic allocation of funds from the Palo Oil saga. Though facing challenges such as political instability in export destinations like South Sudan, Uganda's robust export market for coffee continues to thrive. Mutiso noted that despite the obstacles, there is a strong demand for Ugandan coffee in various markets globally, ensuring a steady flow of revenue. Looking ahead, Mutiso discussed predictions for inflation and the value of the Ugandan shilling in 2017. He expressed confidence in the central bank's management of monetary policy and highlighted the positive impact of increased exports on stabilizing the currency. Mutiso projected a stable outlook for the Ugandan shilling, citing ongoing economic management strategies and favorable market conditions. Overall, the surge in forex reserves reflects Uganda's resilience in the face of challenges, with strategic investments and export diversification driving economic growth.