Uganda Raises Bank Reserve Ratio as Shilling Hits Two-Year Low
Uganda's central bank has raised the cash reserve requirement for commercial banks to 13.5% from 11.0%, effective September 24, as the shilling trades near a two-year low of about 3,925 per dollar.
Uganda's central bank has raised the cash reserve requirement for commercial banks to 13.5% from 11.0%, according to a circular seen on Thursday, as the local currency trades near its weakest level in more than two years.
The new requirement takes effect on September 24. The central bank said the adjustment is meant to support prudent liquidity management and strengthen the transmission of monetary policy in line with current macroeconomic and financial sector conditions.
The shilling has been under pressure in recent weeks, with manufacturers and energy-sector firms increasing their demand for dollars to manage higher fuel costs tied to the Middle East conflict. At 1328 GMT, the currency traded at around 3,925 per dollar, close to its weakest point since February 2024, according to LSEG data.
Adam Mugume, the central bank's executive director for research and policy, ruled out direct intervention through dollar sales to support the shilling, describing such a step as "policy inconsistency." In emailed comments, he said policymakers have sufficient tools available to contain exchange-rate volatility.
The decision to lift the reserve ratio underscores the central bank's preference for absorbing liquidity over direct currency market action as it seeks to steady the shilling without depleting reserves.