Wpid Money Growth
growth

Reforms instituted by the Bank of Uganda (BoU) have pushed up the growth in government securities by 29 percent from 2016 to 2017, the central bank said.

BoU figures show that besides the retail segment, participating banks have enhanced liquidity in the secondary market transactions; total turnover in the secondary market rose to 5.1 trillion (1.4 billion U.S. dollars) in 2017, up from 3.6 trillion (1 billion dollars) in 2016.

In October 2016, the bank launched reforms to the Primary Dealer System to make investing in government securities easier and more accessible to the public. All licensed commercial banks in Uganda have direct access to the primary market for government securities.

Primary dealers are commercial banks that buy government securities (treasury bills and bonds) directly from the central bank during the auctioning time, with the intention of reselling them to other people in the market. The primary dealers act as market maker of government securities in secondary market.

Emmanuel Tumusiime Mutebile, the central bank governor, told reporters recently that banks are all eligible to open Central Securities Depository (CSD) accounts at the BoU for their clients through a web interface on any business day.

The banks can complete client sale and purchase orders online without using the old BoU physical instrument for transferring CSD forms.

“They are all able to accept and process their clients’ bids for government securities. All banks settle their clients’ successful bids and all banks can buy their clients’ securities if the client wishes to sell in the secondary market,” he said.

Investment in Ugandan government securities is open to all investors, foreign and local. According to the BoU, like in many other frontier markets, offshore investors get higher returns on their investment in Ugandan government securities because the interest rate charged is higher.

The bank said although the rates declined in February 2018, they were expected to rise in March 2018 due to anticipated domestic financing by government.

Parliament approved 736 billion shillings (204 million dollars) supplementary budget for the 2017/18 fiscal year to be financed through the issuance of additional treasury securities. Total domestic financing amounts to 1.690 trillion shillings (over 469 million dollars).

Richard Byarugaba, director of financial market at the BoU, said offshore investors hold 4 percent of the government security in the secondary money market.

The prevailing interest charged on government securities, though lower than they were a year ago, have not discouraged foreign investors, Byarugaba said.

“The foreign investors are still actively investing in Ugandan government securities because the rates charged are still higher than those in the developed economies,” he said.

Adam Mugume, executive director of research at the BoU, said the face value of total government securities in the secondary market currently stands at 12.9 trillion shillings (about 3.6 billion dollars). Enditem

Advertisements

Send your news stories to [email protected] and via WhatsApp on +233 234-972-832 

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.