Women at Heritage Kanaani Farms sorting and drying coffee. Export earnings from coffee partly contributed to the BoP surplus/ Business Focus photoUganda has largely been recording Balance of Payments (BoP) deficit for many years.However, in FY 2024/25, Uganda recorded an overall Balance of Payments (BoP) surplus of USD 1.0 billion (UGX3.42 trillion), which was an improved performance compared to the deficit position of USD 995 million recorded in the previous year.According to the recently released Bank of Uganda Integrated Annual Report 30 June 2025, Uganda’s BoP position with the rest of the world remained strong, supported by sustained investor confidence, robust export performance, and stable capital and financial inflows.“The improvement was largely attributed to the 15.3 percent contraction in the current account deficit to USD 3.6 billion, driven by improvement in the goods and income sub-accounts. The trade balance deficit narrowed by 20.4 percent to USD 2.5 billion from USD 3.2 billion recorded in the previous year, supported by a surge in export earnings mainly from gold, coffee and cocoa, which moderated the increase in the import bill. The primary income deficit narrowed by 9.5 percent to USD 1.2 billion, driven by lower income payments on direct investments,” the report reads in part.However, BoU says, interest payments on government external debt remained high at USD 384 million.Additionally, it adds, the secondary income surplus recorded an increase of 7.4 percent to USD 2.1 billion supported by an increase in both remittances and grants to the general government. Remittances increased to USD 1.6 billion from 1.4 billion.“On the other hand, the services deficit widened by 2.6 percent to USD 1.9 billion, mainly because of higher payments for transport services,” BoU says.According to the report, the financial account surplus increased from USD 2.5 billion to USD 4.5 billion in the year ended June 2025.“This expansion was primarily driven by strong direct investment flows, with estimated net inflows of USD 3.7 billion attributed mainly to investments in the oil sector and spillovers to related sectors,” the report reads in part, adding: “The portfolio investment account registered net inflows of USD 610 million, which was a turnaround from the net outflow of USD 342 million recorded in the previous year on account of an increase in offshore investments in government securities.”BoU’s report adds that other investments recorded a net inflow of US$164 million compared to the net outflow of US$137 million recorded in the previous year, supported by loan disbursements.BoU reserves Hit USD 4.3bnIn a deliberate strategy to build reserves in FY 2024/25, the Bank of Uganda stepped up purchases of foreign exchange through the Interbank Foreign Exchange Market.“This was primarily driven by an increase in dollar supply, stemming from portfolio inflows, coffee receipts, and remittances. The relatively high rates in government securities have attracted offshore investors to participate in scheduled government auctions, particularly Treasury Bond auctions. The relative stability of the shilling throughout most of the financial year has also facilitated the BoU’s accumulation of reserves,” the report says, adding: “As a result, the Bank achieved a buildup in the reserve assets to a stock of USD 4,297.8 million, which is equivalent to 3.9 months of future import cover (excluding oil project-related imports), from USD 3,234.0 million, equivalent to 3.1 months in the previous year.”In the coming year, the report says, the Bank plans to start gold purchases in addition to employing various tools, including foreign exchange swaps and cross-currency repos, to diversify reserves.The post How Uganda Recorded BoP Surplus of UGX3.4 Trillion In 2024/25 appeared first on Business Focus.