Uganda has maintained its position in the 26 surveyed markets in Africa, the newly released 2023 Africa Financial Markets Index indicates.
Uganda’s overall score in the Absa Financial Markets Index decreased by one point from 64 in 2022 to 63 in 2023, but it maintained fourth place in the rankings.
The decline is alluded to lower foreign exchange reserves and market liquidity. Uganda’s score fell by 10 points to 67 due to relatively lower scores for interbank foreign exchange turnover and international reserve adequacy. Reserves declined by almost 18% to $3.6 billion (Shs 13.8 trillion) in 2022.
The report shows that South Africa and Egypt continue to score highest as their interbank forex liquidity remains much higher than elsewhere in Africa.
Uganda is currently rallying behind South Africa, Mauritius, and Nigeria. It is, however, ranked first in the East African region, followed by Kenya in the seventh position, Tanzania in the tenth, Rwanda dropping to the 17th position, and the DRC in the 25th position.
However, Uganda fared well in the macroeconomic environment with transparency rising by one point to 86. The improvement was driven by the fall in external debt to 26.8% of gross domestic product in 2022, from 27.7% in 2021. Meanwhile, the country continues to score highly for its policy transparency, macroeconomic data standards, and relatively low inflation rate.
Market transparency, taxes, and the regulatory environment remained unchanged at 79. The country scores well for its accounting standards and transparency, and progress has been driven by the development of environmental, social, and governance standards. Last year, the ministry of finance also expressed its intent to develop a framework for green bond issuance.
“Uganda’s lowest score was in the capacity of local investors. It 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 indicates.
The report shows that building liquidity in domestic markets is an area for improvement. Turnover across listed equities was just 0.3% of market capitalization in the year to June 2023.
“Limited liquidity in domestic bond markets also restrains Uganda’s 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,” the report indicates.
