Dubbed the Absa Africa Financial Markets Index, the survey that was prepared in partnership with the Official Monetary and Financial Institutions Forum (OMFIF) and released every year, indicated that Uganda scored 52% on the index overall and moved two points up.
It showed that Uganda ranks highest in East Africa on access to foreign exchange, in third position after South Africa and Egypt in Africa.
The report indicated that this success by Uganda can be attributed to a policy of low ratio of net portfolio investment to foreign exchange reserves by the central bank which according to the survey means investors have easy access to foreign exchange.
It was also revealed that the high turnover on the interbank foreign exchange market shows that Uganda’s open approach to capital flows has fostered a liquid market.
Speaking during the launch of the report, David Wandera, the head of markets at Absa Uganda said the country has performed well in a number of aspects in the past one year.
He said Uganda has done well in macroeconomic opportunity attributing it to the growth of the GDP; the rate he said is as three times faster than other economies like South Africa.
Uganda remains 10th but with a score of 52 out of 100 on the index overall. This is two points better than 2018 score. This, however, keeps Uganda in the fourth position behind Kenya, which ranks third in Africa. Tanzania and Rwanda ranked 7th and 9th respectively in Africa completing the East African ranking.
The market developments and policy changes which contributed to the growth of financial markets in Uganda include reduction of withholding tax on 10-year government bonds from 20% to 10% signing of all local banks onto a Global Master Repurchase Agreement (GMRA) and the market is now able to trade horizontal repos.
Uganda’s overall performance improved slightly, with the decline in liquidity offset by the higher value of listed bonds and equities.
However, the country’s market liquidity continued to drop, with $11m in turnover, down from $25m. Turnover has been hit by uncertainty over Umeme, the country’s main electricity firm and most-traded stock.
The report also indicated that Uganda’s credit quality has improved as the report points out that Uganda has earned international corporate credit ratings for the first time, alongside Cameroon and Senegal. International credit ratings aid transparency and reflect confidence levels.
The Absa Africa Financial Markets Index tracks the progress on financial market developments across South Africa, Nigeria, Mauritius, Botswana, Kenya, Namibia, Ghana, Zambia, Egypt, Uganda, Mozambique, Senegal, Morocco, Ivory Coast, Angola, Tanzania, Rwanda, Cameroon, Seychelles and Ethiopia.
The aim is to show not just present positions but also how economies can improve market frameworks to meet yardsticks for investor access and sustainable growth.
The index assesses countries according to six pillars: market depth; access to foreign exchange; tax and regulatory environment and market transparency; capacity of local investors; macroeconomic opportunity; and enforceability of financial contracts, collateral positions and insolvency frameworks.