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Uganda improves in the Absa index

Jeff Gable (left) speaking to Absa Bank Uganda officials on the sidelines of the report launch.

But it must promote exports, manage debt and collect more tax

Kampala, Uganda | JULIUS BUSINGE | The 2019 Absa Africa Financial Market Index Report for Uganda released on Jan.28 in Kampala has some good news.

The index, which evaluates financial market development in 20 countries, shows that Uganda remains 10th out of 20 African countries surveyed but with a score of 52 out of 100 on the index overall.

“This is two points better than 2018 score,” the report reads in part.

This, however, keeps Uganda in the fourth position behind Kenya, which ranks third in Africa, Tanzania and Rwanda ranked 7th and 9th respectively in Africa complete the East African ranking.

The Absa index assesses countries according to six pillars – market depth, access to foreign exchange, tax and regulatory environment and market transparency, capacity of local investors, macroeconomic opportunity, and enforceability of financial contracts, collateral positions and insolvency frameworks.

The index prepared in partnership with the Official Monetary and Financial Institutions Forum (OMFIF) and released every year, tracks the progress on financial market developments across, Uganda, South Africa, Nigeria, Mauritius, Botswana, Kenya, Namibia, Ghana, Zambia, Egypt, Mozambique, Senegal, Morocco, Ivory Coast, Angola, Tanzania, Rwanda, Cameroon, Seychelles and Ethiopia.

Uganda’s improved performance was attributed to many factors according to the index. For instance, the country reduced withholding tax on 10-year government bonds from 20% to 10%.

The other pillar is on market depth. The country’s overall performance improved slightly, with the decline in liquidity offset by the higher value of listed bonds and equities.

However, Uganda’s market liquidity continued to drop, with $11million in turnover, down from $25million in the period under review. Turnover has been hit by uncertainty over Umeme’s, the country’s main electricity firm and most-traded stock.

On access to foreign exchange, Uganda ranks highest in East Africa, in third position after South Africa and Egypt. Uganda performs strongly in this pillar, with almost the same score as top-ranked South Africa.

“It has a high level of foreign reserves relative to net portfolio investment flows and enough reserves to cover more than four months of imports,” the index reads in part.

On market transparency, tax and regulatory environment, the country’s credit quality has improved as the report points out that Uganda has earned international corporate credit ratings for the first time, alongside Cameroon and Senegal. International credit ratings aid transparency and reflect confidence levels.

In terms of capacity of local investors, Uganda’s pension assets have risen with government securities accounting for 75% of assets and quoted equities tallying up to 14%. On macroeconomic opportunity, the country registered a decline in non-performing loan ratios.

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