Bank of Uganda pays Shs8.8 billion to manage foreign reserves

The cost of managing Uganda’s foreign exchange reserves increased to Shs8.86 billion in the year ended June 2026, with the Bank of Uganda (BoU) disclosing higher reserve-management fees and other charges without providing a breakdown of what individual fund managers earned or delivered.

The charges, which stood at Shs7.215 billion in the previous financial year, increased by Shs1.645 billion, or about 23 percent, according to BoU’s Annual Report for 2025/2026.

The disclosure comes as foreign-denominated investments managed by external fund managers grew to Shs5.585 trillion from Shs4.689 trillion a year earlier.

However, the report does not indicate how much each manager was entrusted with, the fees paid under individual mandates or the investment returns generated by each institution.

The external managers named in the report include PGIM, formerly Pramerica, Goldman Sachs, JP Morgan Chase and World Bank Treasury.

Their role is to manage part of the country’s foreign reserves within a framework that places capital preservation first, followed by liquidity and returns.

The absence of manager-by-manager disclosures makes it difficult to establish how the cost of each mandate relates to its size and performance.

Under Note 27, titled Financial and Professional Charges, BoU records Shs8.860 billion in reserve-management fees and other charges for the year, compared with Shs7.215 billion in 2024/2025.

The bank does not, however, separate management fees from other charges or identify the amounts paid to individual fund managers and other service providers.

This means the entire Shs8.860 billion cannot be attributed to the named institutions or treated as the cost of managing only the Shs5.585 trillion externally managed portfolio.

The report also does not provide individual investment returns against which the fees could be assessed.

Portfolio expands

Note 34 of the financial statements shows that foreign-denominated assets managed by appointed fund managers increased by Shs895.761 billion to Shs5.585 trillion at the end of June 2026.

The increase was largely driven by additions of Shs4.957 trillion against maturities and sales of Shs4.104 trillion, resulting in net additions of Shs853.063 billion.

The portfolio also recorded realised gains on sales of Shs50.899 billion and unrealised valuation gains of Shs104.605 billion. These were partly offset by negative foreign exchange movements of Shs112.806 billion.

The investments comprised corporate bonds worth Shs3.093 trillion, government bonds valued at Shs2.485 trillion and index-linked government bonds worth Shs6.810 billion.

Most of the corporate and government bond holdings fell within the one-to-five-year maturity category.

But the report does not identify which external manager was responsible for particular securities or how the investments were distributed among the appointed institutions.

Overall returns reported

BoU says its overall reserves portfolio generated positive investment returns and outperformed its strategic benchmarks during the financial year, while maintaining moderate credit and market risks.

The bank also reports that it met its financial targets, maintained sufficient liquidity for external payments and operated within approved risk limits.

However, this performance assessment covers the entire reserves portfolio, including investments managed internally and those entrusted to external fund managers. It does not show how individual external managers performed.

Interest income from financial assets measured at fair value through profit or loss increased to Shs143.336 billion from a restated Shs122.196 billion in the previous financial year, according to Note 8.

The income represents interest earned on the investments and is separate from realised gains and changes in investment valuations recorded in the portfolio reconciliation.

BoU says it also reviewed and implemented its Strategic Asset Allocation framework during the year. The framework guides how reserves are distributed across eligible currencies and asset classes, taking into account the country’s foreign exchange obligations and investment objectives.

The bank divides reserves into transaction and investment tranches to balance the need for readily available funds with the objective of generating investment returns.

A recurring arrangement

The external fund managers named in the 2025/2026 report also appeared in BoU’s Annual Report for 2023/2024, when the combined portfolio of foreign-denominated assets measured at fair value through profit or loss stood at Shs4.512 trillion.

Reserve-management fees and other charges were Shs8.669 billion in that financial year, before declining to Shs7.215 billion in 2024/2025 and rising again to Shs8.860 billion in 2025/2026.

The figures provide a picture of the overall cost of reserve management, but do not show whether the changes resulted from adjustments in individual management contracts, changes in the size of mandates or other service costs.

While BoU’s reporting outlines the growth of externally managed investments and the overall performance of reserves, the absence of individual mandate disclosures leaves unanswered questions about how much each manager handles, what it charges and the returns it generates.