KAMPALA - Uganda's foreign exchange reserves dropped in the 12 months to March this year, fuelled by the effects of Russia's war in Ukraine that hurt the country's balance of payments position, the central bank said.
The Bank of Uganda (BoU) said in a report seen by Reuters on Tuesday that the east African nation's international reserves shrank to $3.6 billion, 18.2% lower than the level recorded in March last year.
In terms of import cover, the reserves amounted to 3.6 months worth of imports, down from 4.7 months in the same month last year.
BoU said the decline in reserves was "on the back of the war-induced upsurges in global commodity prices and tightening of global financial conditions".
The country, a net importer of petroleum products, used up some of its reserves to finance a balance of payments (BoP) deficit as a result, BoU said.
In the same period, Uganda's BoP position swung to a deficit of $1.1 billion from a surplus of $738.5 million.
Uganda's surging interest payments on its mountainous public debt, more than half of which is external, meant the country would struggle to rebuild its reserves, the bank said.
"High government expenditure on imports and debt service obligations will likely constrain reserve build-up," the bank added.
(Reporting by Elias Biryabarema; Editing by Bhargav Acharya and Alex Richardson)