Uganda has maintained its position across the 26 surveyed markets in Africa, according to the newly released 2024 Africa Financial Markets Index. Uganda’s overall score in the Absa Financial Markets Index increased by one point, from 62 in 2023 to 63 in 2024, securing the fourth spot in the rankings. Uganda ranks behind South Africa, Mauritius, and Nigeria.
The increase in Uganda’s score is attributed to a strengthened macroeconomic environment, improved Environmental, Social, and Governance standards (ESG), and the enforcement of legal frameworks, such as the Global Master Legal Agreement and the International Swap and Derivatives Association agreements.
However, Uganda still needs to improve in the area of pensions, where assets per capita remain below $200, and there are minimal market products, including corporate bonds. The government is working on frameworks for introducing green bonds and Sharia-compliant products, which are expected to positively impact Uganda’s score.
In terms of domestic capital markets, Uganda ranked ninth for size and liquidity, the diversity of listed assets, and the standardization of traded instruments, scoring 46 points. For fixed income markets, Uganda’s turnover increased from Shs 17 trillion in 2020 to Shs 82 trillion in 2024.
Uganda scored 67 points in the openness of markets to foreign investment, securing the second position. This score reflects the availability of dollar liquidity, the stability of the currency (which has traded between Shs 3,600 and Shs 3,900), and the ease with which international investors can enter and exit the market.
The country ranked 11th in market transparency, tax, and regulatory environment, with a score of 76 points. This ranking evaluates financial market transparency, tax reforms, regulatory frameworks, and the integration of ESG standards. Uganda is one of the 23 countries that have adopted ESG standards and is working to ensure more companies are rated accordingly.
Uganda performed the worst in pension fund development, ranking 19th with a score of 15 percent. This category assesses the potential for institutional investors to drive capital market growth, based on the size of pension fund markets both per capita and relative to local and state securities.
“As retail investors, we all contribute to this score, whether we are in the formal or informal sectors. It’s important that we invest in existing products and that regulators ensure more diverse products are available to retail investors,” said one expert.
“We need better access to pension funds, especially in relation to domestic and interstate access. The investment by retail investors in government securities is low, below 6%. We need to find ways to improve this and increase the size of pension funds.”
Uganda’s macroeconomic environment and transparency earned it a strong second-place ranking with a score of 87. Scores improved in 17 countries and decreased in 11 countries. This score takes into account the macroeconomic environment, the transparency of economic data, and policy decisions. The report indicates that many economies are recovering from the pandemic and the Russian-Ukrainian war, which pushed inflation higher, though inflation is now decreasing in many countries as GDP improves.
“We are all familiar with budget readings, and we have clear macroeconomic data standards, ensuring statistics are made available. Our monetary policy is transparent and shared with the public and the media, which is a positive for Uganda,” said one analyst.
Uganda is not classified as debt-distressed. According to the IMF, the country has a moderate risk of distress, which is considered a positive sign. Measures are being implemented to reduce Uganda’s debt-to-GDP ratio.
