By The Observer [slightly edited]
For the second year running Uganda has clinched the fourth spot in the continental financial markets index conducted by the Absa Group Limited in association with the Official Monetary and Financial Institutions Forum [OMFIF].
This year the index covered 28 countries with two new entrants in Cabo Verde and Tunisia following the addition of Zimbabwe, Madagascar and the Democratic Republic of Congo [DRC] in 2022. The annual report produced by the index is premised on market depth, market transparency, tax and regulatory environment, access to foreign exchange, capacity of local investors, macroeconomic environment/ transparency, and legal standards and enforceability.
Uganda outperformed its neighbours with bigger economies: Kenya, Tanzania, and Ethiopia, and was only topped by South Africa, Mauritius and Nigeria in the continental ranking index.
With the index’s categories ranked out of a total score of 100, Uganda bagged the following scores in the benchmarked six categories: macroeconomic environment and transparency [86/100], legal standards and enforceability [85/100], market transparency, tax and regulatory environment [79/100], access to foreign exchange [67/100], market depth [46/100] and capacity of local investors [14/100].
On the bright side, Uganda [along with Botswana] led the pack in macroeconomic environment and transparency. This is because of Uganda’s transparent fiscal and monetary policy decisions as well as timely data releases for key macroeconomic variables.
Also, inflation in Uganda dropped from double-digit territory in 2022 to below 5 percent which is within Bank of Uganda’s target. The central bank pins this decrease in inflation on lower food and fuel inflation and recent policy tightening. It is worth noting that between the years 2017 and 2022, Uganda has experienced a compound annual GDP growth rate of 4.5 percent; and this is expected to rise to 6.5 percent between 2022 and 2027.
The report applauds Uganda’s efforts at investor education to improve financial literacy by remarking: “In Uganda an investor education programme was implemented to enhance knowledge and understanding of capital markets products and services among individuals and communities”.
This is done to encourage savings to create awareness about capital markets, and to drive market activity through collective investment schemes. Uganda maintained exclusivity by being one of the seven economies in the index to have adopted a netting legislation. This it accomplished by passing the Financial Institutions Regulations 2023 bill in April. With netting legislation in place, an investor will be able to settle a loss in one financial instrument with another that has got gains.
For example, if an investor has a debt in one security, they can offset it with the security that has gains. Also, it’ll make payments to creditors more assured in case of defaults. The Absa group report makes mention of the steps Uganda is taking to develop guidelines to issue financial securities which will be used to bankroll environmental projects known as green and sustainable assets.
kimaona@yahoo.com
Link to article: https://observer.ug/news/headlines/79569-uganda-gets-top-spot-in-2023-investment-ranking