Uganda Takes a Lead in Financial Markets in East Africa

Uganda trounced all regional peers this year to emerge as a leader in terms of growth of foreign exchange markets, macroeconomic opportunities, and enforceability of standard master agreements—3 of the “pillars” of capital markets growth. This is according to the 6th edition of the 2022 Absa Africa Financial Markets Index released by Absa Bank and the Official Monetary and Financial Institutions Forum (OMFIF), a London-based think tank. Uganda’s rise in the finance industry, according to the survey of 23 countries, is fueled by “large pension fund assets under management.” It also ranks high in other “pillars” such as transparency in taxation and regulation, market depth, and transparency in the enforcement of legal contracts but is beaten by Kenya and Tanzania in terms of capacity of local investors.

The country’s capital markets have been tremendously improving in the past 2 years, scoring highly in areas such as trade and settlements automation, despite the fact that only 18 firms are listed on its stock exchange, compared to 64 firms in Kenya and 28 in Tanzania. A new law—the Foreign Exchange Regulation Act 2022—allows more foreign players to invest in the local debt market. It also invites investors from the Southern Africa Development Community (SADC) to purchase government bonds.