Uganda: ADB Lists Bond On the USE

Kampala, Uganda — The African Development Bank (ADB) last week listed a new note on the Uganda Securities Exchange (USE), the second time the bank has raised funds on the African continent.

The bond worth Ush125b ($52m) is the second time the ADB has sourced for funds on the African continent after the first domestic bond in South Africa in 2007.

The first tranche of Ush12.5b ($5.2m) received an overwhelming subscription of Ush18b ($7.5m).

Ms. Maria Kiwanuka, Uganda's Finance Minister who officiated at the listing ceremony said that this was a significant achievement because it showed that Uganda's capital markets have been found to be attractive.

"The ADB could have chosen to raise funds in any market. Our regulators, the Capital Markets Authority (CMA) and operators, the USE have approved the listing of this note, meaning the ADB has satisfied the market requirements and that the issue will go towards diversifying the securities on offer at the USE," Kiwanuka said.

According to Mr. Patrick Khaemba, the Resident representative of the ADB, the bond was issued in the domestic currency to fund transactions in the economy whenever the need arises.

"In Uganda, ADB has established a programme that will enable swift issuance when the need arises. All funds raised in Uganda will be used to fund projects in Uganda.

"The first tranche was closed on July 20, 2012 and issued on July 25 and was oversubscribed by 50% which is testament to the potential that exists in the Uganda domestic market for financing development initiatives through long term bond issuances," Khaemba said.

He also added that transactions of this nature encourage domestic resource mobilization to finance development initiatives in the country and thereby reduce over reliance on commercial banks and foreign funding that can be volatile.

Khaemba added that as a result of the ongoing reforms and the sustained macroeconomic stability, there will be more bond issuances in the market.

"Our selection of a market is motivated by the existence of borrowers who require domestic currency financing. The ability of the bank to fund itself through the debt market in Uganda is testament to the strides that have been made in this bond market," he said.

Mr. Joseph Kitamirike, the USE CEO said that the ADB bond is the largest single bond that the USE has handled since it opened for business.

On a similar note, economic experts have said that Uganda's government securities are always oversubscribed because of limited investment opportunities in the economy.

Dr. Adam Mugume, the Director of Research at Bank of Uganda told the East African Business Week, "There's no other investment, so where do you put the money? The investment opportunities are limited."

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