Uganda’s financial sector hailed as EA’s most developed

By JAMES ANYANZWA

Uganda runs an economy with the most developed financial sector in the region, according to the latest study by the Official Monetary and Financial Institutions Forum (OMFIF) and Absa Bank.

The latest feat represents a major milestone in the country’s race to become a regional financial hub, with a view to an increased influx of foreign direct investment.

The sixth edition of the Absa Africa Financial Markets Index (2022) report shows that Uganda has made significant progress in five key areas compared to Kenya, Tanzania, Rwanda and DR Congo.

These include access to the foreign exchange market, transparency of the tax and regulatory regime, the capacity of local investors, the state of the macroeconomic environment and transparency in the execution of legal contracts. .

According to the report released last week, Uganda beat its regional peers in market accessibility, openness and transparency.

It is followed by Kenya, Tanzania, Rwanda and the DRC.

Advertising

The report titled Harnessing the Power of African Opportunity shows that Uganda has improved in opening its market to foreign investment.

The country has eased the stringency of capital controls, strengthened interbank liquidity in foreign currencies and improved standards for reporting exchange rate data.

This is in addition to the ability of the Bank of Uganda (BoU) to manage the volatility of foreign capital flows taking into account the adequacy of foreign exchange reserves.

Uganda’s interbank foreign exchange liquidity has increased significantly, with annual turnover rising to $28.4 billion this year from $21.5 billion in 2021.

Tanzania progress

Tanzania also moved to liberalize its capital account through its Foreign Exchange Regulation Act 2022, which opened up access to foreign investors in the domestic debt market.

This included the opportunity for investors from Southern African Development Community (Sadc) member states to participate in the government bond market at the primary market level.

The new regulations also make it easier for domestic residents to access regional financial markets to diversify their investment portfolios.

According to the Absa report, Uganda has also achieved strong improvement in the Environmental, Social and Governance (ESG) indicator.

This is after BoU launched a strategic plan for 2022-27 which includes new goals such as promoting a sustainable financial system.

The Central Bank of Kenya has also issued guidelines for banks to incorporate climate-related factors into their risk management frameworks.

The Absa Africa Financial Markets Index is used as a benchmark by the investment community to assess the market infrastructure of African countries and to help policy makers learn from others.

The study covered 26 countries plus the DRC, Madagascar and Zimbabwe.

South Africa had the most developed financial sector on the continent, while Ethiopia, which is still moving towards a stronger stock exchange and legal framework, was the lowest ranked.

About Arla Lacy

Check Also

Canadian company plans to expand employment at Binghamton plant

PHOTO CREDIT: CMP BINGHAMTON — Thanks to an infusion of cash from investors, …