Uganda remains East Africa’s top-growing financial market

Mr. Mumba Kalifungwa, Absa Bank Uganda’s Managing Director


  • According to the 2023 report Uganda scored 62.8, above Kenya at 59, Tanzania at 55, Rwanda 44 and DRC at 35.

The latest Absa Africa Financial Markets Index released on Tuesday in Kampala has again ranked Uganda’s financial sector as the highest growing within the East African region.

The report released on Tuesday also indicated that Uganda ranks fourth in Africa.

The financial index by Absa evaluates financial market development in 28 countries and highlights economies with the most supportive environment for effective markets.

According to the 2023 report Uganda scored 62.8, above Kenya at 59, Tanzania at 55, Rwanda 44 and DRC at 35.

In Africa, Uganda ranks behind South Africa at 88, Mauritius at 77 and Nigeria at 67.

“Uganda fared better in macroeconomic environment and transparency. Its score rose by one point to 86 and the country retained its second-place position. The improvement was driven by the small fall in external debt to 26.8% of gross domestic product in2022, from 27.7% in 2021. Meanwhile, the country continues to score highly for its policy transparency, macroeconomic data standards and relatively low inflation rate,” the report says.

The report by Absa also credits Uganda for better performance in legal standards and enforceability.

“The score was unchanged at 85 though there are signs of progress as it became the seventh AFMI country to have adopted netting legislation according to the International Securities and Derivatives Association. A bespoke netting bill is reportedly being drafted to assist with obtaining a clean legal opinion from international bodies, which would further improve Uganda’s score in this pillar.”

Uganda’s score remained unchanged at 79 in terms of market transparency, tax and regulatory environment due to the country’ accounting standards and transparency.

Despite the good performance, the report however highlights that the score for Uganda declined from 64.4 in 2022.

The decrease was mostly driven by weaker performance in access to foreign exchange.

“Uganda’s score fell by 10 points to 67 due to relatively lower scores for interbank FX turnover and international reserves adequacy. Reserves declined by almost 18% to $3.6bn in 2022, equivalent to 3.4 months of imports, from 4.6 months a year prior.”

Need for improvement

The Absa Africa Financial Markets Index report for 2023 shows that there is need for improvement after Uganda scored low in terms of capacity of local investors.

“The score fell by one point to 14, as pension fund assets per capita slipped to $119 in 2022, from $125 in 2021. They remain small compared to the index average of $847,” the report says.

The report also points to building liquidity in domestic markets as another key area for improvement as turnover across listed equities was just 0.3% of market capitalisation in the year to June 2023.

“ Limited liquidity in domestic bond markets also restrains Uganda’s score in terms of market depth where it ranks eighth. Initiatives to boost liquidity and local investor participation are underway, including a project to link the centralised securities depositories of the central bank and securities exchange, as well as the ‘Okusevinga’ initiative to improve retail investor access to government bonds.”

Commenting about the report, the deputy Bank of Uganda Governor, Michael Atingi-Ego hailed Uganda’s performance, despite the challenges.

“This is commendable, considering that our economy, like many others, was adversely affected by the COVID pandemic and the effects of the Russia-Ukraine war. The resulting global supply chain shocks put pressure on domestic inflation in the second half of 2022, and the higher interest rates caused liquidity tightness, effectively disrupting access to financial resources,” Atingi- Ego said.

He said Bank of Uganda’s decisive macroeconomic and macroprudential policy measures have helped to shield the domestic economy and financial system from the complete pass-through of various external shocks.

“The initiatives we are undertaking to deepen our financial markets, have contributed to curbing exchange rate volatility and lowering inflation.”

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