Uganda’s central bank has moved aggressively to drain cash from the banking system as rising fuel prices and mounting pressure on the shilling expose the country’s growing vulnerability to the escalating conflict in the Middle East.
The Bank of Uganda (BoU) this month raised the Cash Reserve Ratio (CRR), the portion of customer deposits commercial banks must keep with the central bank, from 9.5 percent to 11 percent in one of its strongest liquidity tightening measures in recent years.
The move comes as the ongoing US-Iran-Israel conflict disrupts global oil markets, pushes up shipping costs and delays cargo movements through the strategically critical Strait of Hormuz, a major global energy transit route.
For many Ugandans, the effects are already visible at petrol stations.
Fuel prices in Kampala have climbed to between Ush5,000 ($1.3) and Ush6,000 ($1.6) per litre, while some towns outside the capital are reportedly recording prices as high as Ush10,000 ($2.6) per litre, according to local market sources.
