Uganda has retained its position as one of Africa’s top financial markets, securing fourth place in the 2024 Absa Africa Financial Markets Index. The report, released in Kampala on January 28th, highlights the country’s strong macroeconomic stability and improvements in market transparency while acknowledging challenges in market depth and pension fund development.
The index, which evaluates 29 African economies across six key pillars, awarded Uganda an overall score of 63, a slight increase from 62 in 2023. While trailing behind South Africa, Mauritius, and Nigeria, Uganda demonstrated significant strengths in macroeconomic stability, scoring 87 points – the second-highest among all assessed countries. This robust performance reflects the country’s sound fiscal policies, declining inflation, and improving foreign reserve position.
Furthermore, Uganda scored 85 points in legal standards and enforceability, indicating progress in regulatory frameworks and compliance with international financial regulations. Market transparency also emerged as a strong area, with Uganda achieving 76 points, reflecting improvements in governance and corporate reporting.
However, the report also highlighted challenges. Market depth remains a concern, with Uganda scoring 46 points, indicating a relatively illiquid market with limited product diversity. Moreover, pension fund development is a significant weakness, with Uganda scoring only 15 points, one of the lowest in the index.
Deputy Governor of the Bank of Uganda, Michael Ating-Ego, acknowledged the progress made while emphasizing the need for continued reforms to enhance market competitiveness. He stressed the importance of maintaining a stable monetary policy, while also cautioning against the potential risks posed by global uncertainties.
The report emphasizes the need for Uganda to prioritize pension system development and broaden financial product offerings to compete with leading financial markets. It also calls for ongoing policy reforms to create a more vibrant and inclusive financial ecosystem.
Jeff Gable, chief economist at Absa Group, emphasized the increasing influence of global economic trends on African financial markets, including Uganda’s. He highlighted the impact of developments in the United States and the importance of effective economic management within Uganda, particularly in areas such as oil revenue utilization, debt management, and infrastructure investment.
The report underscores the significance of regional integration through the East African Community (EAC) and the African Continental Free Trade Area (AfCFTA) in expanding financial market opportunities for Uganda.
The Absa Africa Financial Markets Index, now in its eighth edition, serves as a crucial benchmark for assessing Africa’s financial sector progress. As Uganda strives to further enhance its financial market, addressing the identified challenges and capitalizing on regional integration will be critical for its long-term success.