A report from the Bank of Uganda revealed that Foreign Direct Investment (FDI) in the country increased to $474.8m (about Shs1.769 trillion) in the last quarter of 2022, which represents a 35% rise compared to the previous quarter. The growth was due to increased activity in the oil sector. Additionally, the bank reported an 18% slowdown in capital outflows, which totalled $227.6m (about Shs845.8b), indicating a return of investor confidence.
The bank previously stated that capital outflows were putting pressure on the Ugandan shilling, which had closed the year with more than two months of appreciation. The increased inflow was a result of a drawdown on deposit of $125.8m (about Shs468.7b), according to the bank. It also noted that monetary policy tightening in advanced economies in the later part of 2022 had triggered offshore investors’ exit from domestic debt securities in favor of safe and increasing yields in advanced economies.
However, the bank reported that the outbreak of Ebola during the last quarter of 2022 had a negative impact on tourism receipts, which dropped by 30.7%. It is expected that this will continue to weigh down tourism inflows, while high government expenditure on imports and debt service obligations will likely constrain reserve build-up, further weakening Uganda’s balance of payments position.
During the period, the Central Bank also noted that the current account deficit had widened, both on an annual and quarterly basis, by $112.7m and $41m to $3.9b and $1b, respectively. This was due to an 18.5% decline in trade balance and a 25.9% increase in the services deficit. The trade deficit widened as exports fell considerably to $4.1b while imports rose to $7.8b. Excluding gold trade, the trade balance deteriorated even further, by 21% to $3.6b due to the decline in terms of trade.
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