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East African central bank chiefs discuss replenishing dwindling reserves amid global shocks

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Central bank governors from the East African Community (EAC) said they were exploring new ways to replenish dwindling reserves caused by regional and global shocks such as conflicts, climate change and high cost of basic commodities.

James Alic Garang, the governor of the Bank of South Sudan, said that regional economies are facing serious threats like climate change and civil strife, which are undermining their ability to strengthen foreign exchange reserves.

“At home, the stakes are a bit higher as the country prepares to conduct its first democratic general election by December this year, geopolitical tensions, including the conflict in Sudan, has affected our oil pipeline to Port Sudan,” Alic said during the closing of the week-long meeting of regional central bank governors in Juba, the capital of South Sudan.

He said the conflict in Gaza has also disrupted the major trading route in the Gulf of Aden, where the shipment of South Sudan’s crude oil passes through, hence posing a challenge to the east African nation’s economic outlook.

“As a result of the above challenges, including the conflict in the neighboring countries, our reserves are at a historically low level, and this has huge implications for the balance of payments, with negative consequence for our currency depreciation and the volatility manifested in the price of goods and services,” Alic said.

Adam Mugume, the executive director of Research and Economic Analysis in the Bank of Uganda, said that his country is struggling to replenish foreign exchange reserves and meet the macroeconomic convergence criteria set by the regional bloc, which calls on member states to have import cover for at least 4.5 months.

He said the economic uncertainty is concerning, urging EAC member states to learn from some of the countries that are doing well in tackling the challenge.

Kamau Thugge, the governor of the Central Bank of Kenya, said that the Kenyan economy has rebounded after the shilling appreciated against the U.S. dollar owing to an increase in remittances and tight monetary policy.

“Our remittances are quite robust. They are a very dependable source of foreign exchange,” he said.

Thugge said that as economies in the region grow larger, stronger and more deeply integrated, countries should enhance resilience to multiple shocks arising from global challenges and geopolitical developments.

Emmanuel M. Tutuba, the governor of the Bank of Tanzania, said that global shocks have adversely impacted the macro-economic convergence that has been achieved by the EAC member states.

“We have observed a deterioration of fiscal space, elevated debt vulnerabilities, increased inflation levels, and also increased pressures on our local currencies,” he said.

Structural challenges emanating from the devastating impact of climate change, such as prolonged dry spells and floods, thunderstorms, and infectious diseases, have also gained prominence in the region, Tutuba said.

“We should enhance collaborative efforts in monetary banking, financial markets, and payment spheres to enable the region to sail through these challenges smoothly,” he said.

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