Kampala — Uganda’s central bank has raised the cash reserve requirement for commercial banks as the Ugandan shilling comes under renewed pressure, trading near its weakest level in more than two years.
The Bank of Uganda increased the cash reserve requirement to 13.5% from 11%, with the new requirement taking effect on September 24.
The move comes as the shilling has weakened amid increased demand for U.S. dollars from manufacturers and energy-sector companies facing higher fuel costs linked to the Middle East conflict.
At around 1328 GMT on Thursday, the shilling traded at approximately 3,925 per dollar, its weakest level since February 2024, according to LSEG data.
The central bank said the reserve-ratio adjustment is intended to strengthen liquidity management and improve the transmission of monetary policy amid changing macroeconomic and financial-sector conditions.
No Direct Dollar Intervention
Adam Mugume, the Bank of Uganda’s executive director for research and policy, said the central bank was not considering direct intervention through dollar sales to support the currency.
He described such intervention as potentially “policy inconsistency”, adding that policymakers have other tools available to manage exchange-rate volatility.
The higher reserve requirement means commercial banks will have to hold a larger share of their deposits as reserves, potentially reducing the liquidity available for lending and other uses within the banking system.
Source: Reuters
Reporting: Elias Biryabarema
Editing: Vincent Mumo Nzilani and Alex Richardson
