The Bank of Uganda in collaboration with the Ministry of Finance, Planning and Economic Development, has this afternoon announced that it has undertaken reforms to the Government securities market as part of the process of increasing efficiency and enhancing liquidity in the financial market.
The announcement was made by Governor Emmanuel Tumusiime Mutebile who noted that these reforms have in part included automation of the auction processes to enhance efficiency and price transparency, which has increased the global visibility of Uganda’s financial markets.
‘’While these reforms have been successful in promoting a vibrant primary market, challenges nonetheless remain in the secondary market, as the trades have remained persistently low. In FY 2019/20, the turnover in the secondary market was recorded at 41 percent of the total outstanding stock of Government securities’’- Mutebile stated
“This means that 59 percent of the total outstanding stock of Government securities was not traded at all, and was simply held till maturity. This is quite low compared to say, South Africa, where secondary market turnover amounts to 1,200 percent of the total outstanding stock of Government securities. This means that in South Africa, the total outstanding stock of Government securities changes hands 12 times in a year, which substantially increases liquidity in the market’’- he added.
Primary Dealer Banks
The Central Bank has also confirmed that effective October 01, 2020, competitive bidding in the primary market for Government securities shall be limited to only seven Primary Dealer Banks.
Letters to My Younger Self: Winnie Nakimuli—"You Are Worthy Simply Because You Exist"Moving forward, the seven commercial banks including Absa Bank, Bank of Baroda, Centenary Bank, dfcu Bank, Housing Finance Bank, Stanbic Bank and Standard Chartered Bank have now been appointed Primary Dealer Banks for a period of three years.
The governor also advised Investors to continue submitting their bids to their respective commercial banks as usual, where they will be well served.
Mutebile further says that all commercial banks will continue to access the primary market for non competitive bids (below UGX 200 million). He However noted that, for competitive bids 3 (those above UGX 200 million), Non-Primary Dealer Banks will access government securities from the Primary Dealer Banks in the secondary market
‘’I would like to take this opportunity to congratulate the new Primary Dealer Banks and to say that the Bank of Uganda looks forward to a more vibrant secondary market for Government securities in Uganda’’- Mutebile concluded.
