STRENGTHENING FINANCIAL SERVICES AND MARKETS

1. STRENGTHENING FINANCIAL SERVICES AND MARKETS PRESENTATION BY HON. MARIA KIWANUKA MINISTER OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT AT THE UGANDA INVESTMENT FORUM-UK 6TH MAY 2014

2. 1. UGANDA FACTS AND FIGURES • Uganda Population 36.35m • EAC member 150m • COMESA member 420m; • GDP estimated at US$ 25 Bn; • Fully liberalised economy: open • private sector driven; • Open current and capital A/C • Credited rated B by Standard & Poor's and Moody’s; • PSI program with the IMF.

3. 2. GOVT/PRIVATE SECTORDEVELOPMENT INTERFACE 2a.Sustainable and Inclusive Growth = Development i.e more Ugandans working at more Value Added Jobs across the Country; 2b Private Sector is the engine of growth, (80% of GDP). Government facilitates private sector activities. i.e: Govt/private sector development interface. • Sustain a stable Macroeconomic framework; • Accelerate investment in “bulky” public goods-i.e power, all-weather highways and roads, piped water system; • Ensure a predictable and supportive legal and regulatory regime • Facilitate the rise of the middle class/consumer power Skilled technical workforce to power industrialization Continue to expand Education and Health care(+25%of budget)

4. 3. MINISTRY OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT MANDATE To carry out Government Socio Economic objectives and to co-ordinate maximum support to the private sector “Formulate sound economic policies, maximize revenue mobilization, ensure efficient allocation and accountability for public resources so as to achieve the most rapid and sustainable economic growth and development”.

5. 4. MAIN OBJECTIVES OF THE FISCAL AND MONETARY POLICY IN UGANDA Maintain and strengthen market based policies Attain real rate of economic growth of at least 7% per annum in the medium term; Keep annual consumer price inflation rate within single digit; Maintain a competitive real exchange rate; Maintain prudent level of foreign exchange reserves of at least 4.5 months Competitively position Uganda in East Africa Community integration. Strengthen domestic revenue mobilisation for financing development Ensure value for money and public expenditure Use oil windfall revenues for sustainable infrastructure development

6. 5. RECENT MACROECONOMIC ACHIEVEMENTS Economic growth averaged 5.8% p.a.;(2008 -2013) Low and Stable inflation for the last two decades except in the period 2011-2012 during the global crisis Steady Growth in FDI over the past decade – confidence in our macroeconomic stability; Macro-financial risks in Uganda’s banking sector eased; Diversification of economic growth sectors

7. 6. GLOBAL FINANCIAL CRISIS • Insulated from the worst effects of the Global Financial Crisis • Suffered second round effects but was short lived due to: a) Diversification of regional markets: Exports to COMESA region increased from US$494m in 2006 to US$1,755m in 2013 of which exports to EAC increased from US$265m to US$783m. b) Strong macro-economic framework; c)Improvements in macroeconomic management including the introduction of inflation targeting to anchor expectations.

8. 7. FINANCIAL SECTOR IN UGANDA • Four regulators for different segments of the financial sector; • Bank of Uganda (BOU) for the Banking sector, • Capital Markets Authority (CMA) for the Securities trading, • Uganda Retirements Benefits Regulatory Authority (UBRA) for pensions sector; Liberalisation of the pension sector will support the development of private equity funds • Insurance Regulatory Authority (IRA) for insurance business. The IRA is currently drafting regulations for micro insurance and health insurance. • the BOU regularly upgrades the regulatory environment in line with Basle principles.

9. 8. DEVELOPMENTS TO DEEPEN THE FINANCIAL SECTOR • Banking Sector accounts for 80% and NSSF accounts for almost 20%; • Implementing institutional reforms to unlock intermediation of medium/long term resources. This includes liberalization of the Pension sector. • Rapid expansion of “banked” public due to new technology. • Aggressive MFPED/BOU Financial Literacy Strategy

10. 9. FINANCIAL SECTOR RECENT REFORMS • Legislative changes to Financial Institutions Act (FIA )2004 to include agency banking, banking along Islamic principles and bank assurance, Revising the minimum capital requirements for financial institutions; • Introduced risk based supervision, and capital buffers under Basle 3 are soon to be gazetted; • Introduced macro prudential measures to ensure financial system stability; • Drafting regulations for the recently passed Anti-Money laundering Act 2012 in process of setting up the Financial Intelligence Authority; • Strengthening the BOU supervisory capacity, including the roll out of the Liquidity coverage ratio to all banks in 2013 to enhance banks’ resilience to liquidity risk by ensuring that they have sufficient high quality liquid resources all the time;

11. 10. COMMERCIAL BANKING SECTOR • 26 licensed commercial banks, total network of 544 branches and 748 ATMs as at December 2013; • Dynamic technological advancement; • Rapid growth in the Mobile Banking Network; banked public has doubled to over 50% • Credit to private sector as a share of GDP has increased from 6.8% in 2002/3 to 14.1% in 2012/13

12. MAJOR BANKS IN UGANDA • Stanbic SA • Standard Chartered UK • Crane Local • Barclays UK • Centenary Local • DFCU UK/Local • Citibank USA • Bank of India India • Bank Of Baroda India • Bank Of Africa Morocco • Ecobank Togo • Kenya Commercial Bank Kenya

13. 11. FDI vs. Domestic Investment • FDI increased from US$735 million in FY2008/09 - FY2012/13 1493 million. (9%GDP), Domestic, US$ 1,283.7 million (7.7% GDP),Joint venture, US$ 66.6 million (0.4% GDP). • FDI main contributors: India (US$ 332.5 million), Singapore (US$ 331.8 million) and Great Britain (US$ 198.2 million). • Jobs created: Domestic investors (38,492) FDI (33,373) and joint ventures (1,917).

14. 12. KEY ATTRACTIONS • Stable macroeconomic environment; • Liberalised markets: liberal current and capital accounts; • Flexible labour markets; • Oil revenues earmarked for accelerated infrastructure development; • Most favourable agro-climate in East Africa Net exporter of food to the region: Second biggest producer of coffee in Africa; Fourth biggest producer of tea in Africa • Land-linked at the center of E. Africa region Gateway to E.A hinterland • Unique tourist attractions including: Source of the Nile, mountain gorillas, tree climbing lions widest variety of bird life worldwide..

15. 13. IMPACT OF EAC CONVERGENCE STRATEGY Wide market access to market of over 150 million consumers; Single customs union Common market policies Distribution hub of the East and Central Africa region; Improved Efficiency in fiscal and monetary management; Signing of the EAMU protocol as the first step on the road map to a single currency for the five EAC countries

16. 14. Growth Opportunities in the Financial Sector Strengthening the non-banking sector. • Pension Sector Reforms to unlock medium/long time resources • Development banking to support medium long term financing • Risk Insurance for development of insurance to mitigate the risks in oil exploration and production. • Health insurance once the National Health Bill is enacted Technology – Driver of banking and non-banking innovations. Mobile Network Operators – Over 14 million customers, Over USD 640 million in mobile money transfers. • Digital revolution – e-channels (Mobile, Internet, ATMs). • Innovation – new payment systems, new products.

17. 14. Growth Opportunities to be Financed • Infrastructure – rail, roads, energy • Support to Oil and Gas sub sector • Petroleum exploration and production • Agribusiness- agro-processing,valueaddition and export promotion. • Regional Distribution and Warehousing • Tourism • Mining and refining • Venture Capital Financing for Private/Producer/Partnerships

18. THANK YOU