Increasing foreign currency conversion in the local money market has forced the Bank of Uganda (BOU) to maintain a tight monetary stance in the last two months, Central Bank officials have said
INCREASING foreign currency conversion in the local money market has forced the Bank of Uganda (BOU) to maintain a tight monetary stance in the last two months, Central Bank officials said.
â€œThere were some significant conversions of foreign exchange accounts in the last few months. Donor and private sector inflows have also been on the increase forcing the Central Bank to pursue a tight monetary policy stance. We donâ€™t want the situation to escalate. It is the Bank of Uganda to worry and make sure the liquidity ratio does not impact on the economy negatively,â€ BOUâ€™s Rweyemamu Rweikiza told journalists on Thursday.
Rweikiza, speaking at a monthly press discourse, said BOU had tactfully and as a monetary policy increased the offer of treasury bills, which led to adjustments in interest rates.
In the latest BOU, Economic and Financial Indicators, gross purchase of foreign exchange in the local market rose by sh$15.36m to $158.56m, while gross sales increased by $23.11m to $176.09m.
The shortfall between gross purchases and sales amounted to $17.53m and the total transaction volume was $334.65m. This was 11.5% higher than the $296.18m in October.
To mop up excess liquidity in the economy, BOU had to offer the risk free Treasury bills at a more attractive rate.
BOU stance tightens up