Macroeconomic performance and outlook
The Ugandan economy reported strong growth in 2019, estimated at 6.3%, largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining. Agriculture grew at just 3.8%. Retail, construction, and telecommunications were key economic driv- ers. Inflation is expected to remain below 5%, strength- ening the domestic economy.
Government spending continues to increase, under- pinned by public infrastructure and capital investments for the nascent oil and gas industry. Expenditures have increased faster than domestic revenues, widening the fiscal deficit in 2019. The deficit is largely financed through external borrowing, supplemented with domestic securities. Despite the rise in the deficit, Uganda is classified at low risk of debt distress. However, debt reached an estimated 43.6% of GDP in 2019, up from 25% in 2012, raising medium-term concerns. Lending remains within IMF limits, but risks have increased due to higher costs of debt servicing and infrastructure investments.
Exports, dependent on primary products, have not kept up with imports, widening the trade deficit to an estimated 9.4% of GDP in 2019 from 8.3% in 2018. The increasing current account deficit has been largely financed by foreign direct investment (2.6% of GDP) and externally financed projects. External reserves were at a comfortable 4.4 months of imports in 2019, while the exchange rate was stable, averaging 3,727 Ugandan shillings per dollar.
The poverty rate fell during the past two decades but rebounded in 2016/17, reaching 21.4%, meaning that 10 million people were living below the national poverty line. Inequality has changed little. More than two-thirds of the working-age population is in agriculture. Four-fifths of workers are own account workers or contributing family workers, with one-fifth in paid employment or themselves employers. Youth unemployment is a challenge.
Tailwinds and headwinds
Retail, construction, and telecommunications drive the economy, with mining, transport, and hospitality expected to grow as oil and gas investments are made. Price stability will boost domestic business confidence while fiscal policy is likely to remain accommodating.
Urban development with rapid urbanization, rising population density, increasing market size and access, clustering of skills and technology, and proximity to financial institutions offers opportunities for business development, firm creation, and new jobs. Kampala was, until 2019, Uganda’s only urban agglomeration classified as a city. The reclassification of nine munic- ipalities as regional cities can promote new opportuni- ties. The new cities will be phased in over three years, expanding infrastructure such as paved roads, power distribution, water and sanitation services, and waste management.
Poor global growth, affected by the US–China trade tensions and stagnant growth and subdued demand in Europe risks reducing Ugandan exports. Domesti- cally, adverse weather can lower agriculture produc- tion, harming the trade balance and current account balance, given the importance to Uganda of exporting food to the East Africa region. Other domestic risks include weak revenue mobilization, weak private sector credit growth, and fiscal expansion in the run-up to the 2021 elections.
Uganda is transitioning to a service economy but faces low productivity and low job creation. The econ- omy has become more productive, but productivity differences across industry, services, and agriculture are large. Industrial productivity is seven to eight times higher than in the other two sectors, but it cannot absorb the 600,000 youths entering the jobs market each year.
Health sector preparedness
Uganda has a public health emergency control center, which enabled managing and coordinating the outbreak in close collaboration with security forces to contain fur- ther spreading. Containment measures were swiftly implemented, suspending international flights, imposing a national lockdown, and screening cross-border traffic. Uganda ranked 63 among 195 countries and 3 among 54 African countries on the 2019 Global Health Security Index.
The government has implemented social mitigation mea- sures to support the most vulnerable, notably food dis- tribution in selected urban areas. Additional resources have been allocated for surveillance, testing, community engagement, and protective gear. The total response is estimated at $265 million (0.8% of GDP), of which the gov- ernment has allocated $32 million with additional commit- ments from external partners.
To support private economic activity, the central bank reduced its policy rate by 100 basis points to 8% in April and extended credit to banks in distress to address the expected rise in nonperforming loans. Credit relief is extended to borrowers experiencing liquidity shortfalls for up to 12 months. Once the public health containment measures are eased, it will be critical to implement mea- sures to quickly revive economic activity to limit the losses. Injecting liquidity into the economy can boost aggregate demand by providing cash transfers to the most vulner- able groups, mainly informal urban traders and self-em- ployed. Additional targeted liquidity support to firms in tourism, hospitality, public transport and others may also be required to limit insolvency and job loss, as bankrupt firms will be difficult to reactivate.
- The government securities yield curve extended to 15 years with 4benchmark points along the curve (2-5-10 and 15 years).
- Uganda is 13th in the ABMDI 2017 Ranking Report.
The actual planned volume of net domestic government securities issuance each year is decided as part of the Budget formation process, and is guided by an assessment of market and economic conditions, budgetary priorities, and by the full set of guidelines that are set out in the Debt Strategy.
Debt is issued in line with the 5-yearly Debt Strategy, which guides overall debt issuance and management policy. Ministry of Finance conducts annual Debt Sustainability Analyses to establish the extent to which Uganda’s debt meets solvency and liquidity sustainability criteria and the extent to which the debt is exposed to different forms of risk. An auction calendar is published on the central bank and Ministry of Finance websites at te start of the fiancial yearl. All government securities are sold by via a single price auction method..
here are five (5) benchmark maturities (2, 3, 5, 10 and 15 years) that the government maintains by re-issuing them regularly with large issue amounts to increase secondary market liquidity.
Yield curve calculation models
Building a benchmark yield curve is a consideration for issuance. The country built a yield curve based on simple interpolation method. This curve is an implied yield curve from on-the-run yields quoted by commercial banks
Where there is no yield for a certain point along the yield curve (off-the-run securities), linear interpolation is used to generate an appropriate yield.
Yield curve managed by
The yield curve is produced by the Bank of Uganda
Yield curve Display platform
The yield curve is accessed from the Bank of Uganda website
Challenges in building an efficient yield curve
- Market fragmentation
- Limited secondary market
- Narrow investor base
Guide to Buying Bonds
Procedures for market participation
Any investor who wishes to purchase Uganda government securities in the primary market and/or secondary market must contact a commercial bank in Uganda and have or open an account in the Central Securities Depository (CSD) at Bank of Uganda. The type of investors that could participate in the government securities market as listed on the Central Bank of Uganda website are:
- Commercial banks
- Insurance firms
- Government agencies
- Pension funds
- Individuals (of at least 18 years)
Offshore investors, provided they opened an account beforehand at the CSD, and invest through a Ugandan commercial bank.
In the secondary market, the Uganda Securities Exchange (USE) provides a list of licensed brokers and investment advisors authorized to deal in Uganda government bonds, in additiona to commercial banks.
Further information on Uganda Securities Market is provided on the Central Bank website.
The settlement time is T+1 in the primary market. In the secondary market, the time falls down to T+ 0 or same day settlement. In the secondary market, investors could however agree on another settlement cycle depending on their circumstances.
There is a 20% withholding tax applicable on interest income earned by investors, regardless of residency on government securities with maturities less than 10 years; for longer dated bonds of 10 years and above, the withholding tax rate on interest income is 10%. There is no tax on trades in the secondary market. Uganda has signed Double Taxation Agreements with a number of countries which allows investors from those countries to pay lower taxes than mentioned here.
|Rating Agency||Current rating||Outlook|
|Standard and Poor's||B||Stable|
All the twenty six (26) licensed commercial banks (2019) are permitted to work as Primary Dealers for government securities in Uganda. The Primary Dealer system is currently under reviehe to provide for full insurance of auction subscriptions and increase vibrancy in the secondary market through firm two-way price quotes.
Openness to international investors
There are no restrictions imposed on foreign investors in the bond market in Uganda.
Residents and non-residents alike are authorized to participate in the government securities market.
Capital account was fully liberalized in 1997, along with the foreign exchange market.
Restriction on FX and profit repatriation
Foreigners can hold foreign exchange accounts and purchase FX at any commercial bank without the approval of the central Bank of Uganda (BoU).
Documents & Resources
Documents - Ministry of Finance
- Uganda_Budget_Speech_2014-15.pdf (13.44 MB)
- Uganda_Public_Finance_Management_Act_2015_3.pdf (140 kB)
- FY_2019-20_Budget_Speech.pdf (711 kB)
Documents - Debt Management Office
- Public_Debt_and_other_Financial_Liabilities_Management_Framework_FY_201819_-202223_Final.pdf (0.99 MB)
- The_Medium_Term_Debt_Management_Strategy_2018-19_2021-22.pdf (0.91 MB)
Documents - Central Bank
- Bank of Uganda Act (57 kB)
- Uganda_Auction_Procedures.pdf (204 kB)
- BoU-Fin_Stab-June_2014.pdf (1.57 MB)
- BoU-State_of_Eco-Mar_2015.pdf (1.00 MB)
- BoU-Supervis_Report_2014.pdf (1.17 MB)
- BoU_AR_2013-14.pdf (2.65 MB)
- Auction-Procedures-and-Guidlines-2017_1_.pdf (224 kB)
- Bank_of_Uganda_Act2000_1_.pdf (49 kB)
- Auction-Calendar-2019-2020.pdf (480 kB)
- Auction-Calendar-2019-2020.pdf (480 kB)
Documents - Stock Exchange
- USE-Equity_Trading_Rules-2015.pdf (4.66 MB)
Documents - Capital Market Regulator
- Capital Markets Authority Act (267 kB)
- Uganda_Cap_Mkts_Strat_plan-2013-16.pdf (2.28 MB)
- Uganda_CMA-AR_2014.pdf (2.67 MB)
Documents - Other sources
- Uganda_Vision_2040.pdf (21 MB)