23 January 2019

Uganda Ranked Third in Ease of Foreign Exchange Access

Absa, which currently owns the Barclays Africa franchise, has rated Uganda among countries with the easiest access to foreign exchange.

Uganda was rated third among 20 countries that were surveyed in the Absa Africa Financial Markets Index, 2018. The country scored 83 out of a possible 100.

Market liberalisation, according to the report, has opened Uganda to open participation thus easing accesses to the foreign exchange space.

Uganda liberalised the foreign exchange market about 20 years, which encouraged inclusive participation.

While presenting the report in Kampala yesterday, Mr David Arthur Wandera, the Barclays head of markets, said low capital restrictions and improvement in net portfolio flows has allowed Uganda to rank better than other African markets in foreign exchange space.

This, he said, has also been augmented by the Central Bank's capacity to manage foreign exchange demands resulting from an improved net portfolio flow.

Uganda was ranked behind South Africa and Kenya, which came first and second, respectively.

In 2017, according to the report, Uganda posted a turnover of $14b in the Interbank Foreign Exchange space compared to South Africa's $1.2 trillion and Kenya's $34b.

However, the country was ranked relatively poor in relation to market transparency, tax and regulation.

According to the report, several countries, unlike Uganda, have created more transparent and well-regulated financial markets, supported by improved tax environment.

This, the report said, is particularly vital for attracting foreign direct investment as well as encouraging domestic participation and aiding market development.

Uganda scored 60 out of 100 and it was ranked number 12 out 0f 20 countries that were surveyed.

The ranking, according to Mr Wandera, was below average and respondents thought that the tax environment does not encourage market development.

Withholding taxes on government securities, which is at 20 per cent compared to the regional average of 15 per cent and limited treaties against double taxation, were cited as some of the biggest investment impediments.

Financial markets standards

Uganda also scored poorly in enforcing financial market standards posting 33 out of a possible 100. The country was ranked eleventh out of the 20 markets that were surveyed.

However, the ranking was an improvement from 2017's 13th position.

Mr Wandera said Uganda's long-term success in developing local financial markets will depend on improving legal and regulatory certainty as well as enforcing standards in a defined manner.

Overall, Uganda was ranked 10 out of 20 with the country outperforming, especially in GDP growth, which is forecasted to expand by more than three times than that of South Africa by 2023.

Uganda also scored well in transparency of budgetary data, macroeconomic data standards and Monetary Policy Committee transparency.

Global uncertainties

Whereas, there has been global uncertainties, sub Saharan Africa is expected to continue with a fragile recovery.

In Uganda, GDP growth has been climbing to 6.8 per cent year-on-year in the last quarter of 2018 to 5.2 per cent.

According to Ms Samantha Singh, an economist, many sectors performed better while business activity has improved on a multi month basis and there has been marked acceleration in credit growth.

This, she says, and investment in key infrastructure will help Africa to achieve good growth over the medium term, although there have been risks presented by delays in oil production.

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