Uganda Becomes Africa’s Second Strongest Market for Foreign Exchange Access

Uganda has risen to second place among 29 African economies for access to foreign exchange, recording the largest improvement of any country in the foreign exchange pillar of the 2026 Absa Africa Financial Markets Index as deeper interbank trading, rapid growth in currency swaps, stronger reporting standards and a comparatively open foreign exchange regime improve the ability of businesses and investors to obtain and manage foreign currency. Uganda’s score increased by 12 points to 81, placing it behind only South Africa, which scored 90, and ahead of Madagascar, Mauritius, Kenya and Nigeria. The improvement also contributes to Uganda’s fourth place position in the overall African financial markets ranking, where it trails only South Africa, Mauritius and Namibia. The ranking is economically more significant than a simple comparison of exchange rate stability. The index measures whether international investors can access foreign currency, repatriate capital, trade through functioning interbank markets and protect themselves against currency movements, while also assessing reserve adequacy, foreign exchange controls and the transparency with which market information is published. Uganda performs strongly on three of those four dimensions, scoring 91 for foreign exchange liquidity, 97 for foreign exchange arrangements and controls and 100 for reporting standards. Its weakness is the size of the reserve buffer, where it scores only 37 because international reserves still cover slightly less than three months of imports. For investors, the distinction matters because a country can attract foreign capital while still making entry and exit difficult if dollars are scarce, interbank trading is shallow or restrictions complicate conversion and repatriation. Uganda’s 2026 performance suggests that its foreign exchange market is becoming more functional even before expected oil production begins adding a new source of foreign currency to the economy. Foreign Exchange Trading Has Expanded Rapidly Uganda’s improvement is most visible in trading activity. Annual interbank foreign exchange turnover reached US$5.8 billion in the year to June 2026, about 15 percent higher than during the previous year, while total spot foreign exchange turnover increased from US$33.2 billion in June 2025 to US$41.1 billion in June 2026. The stronger trading volumes lifted Uganda’s foreign exchange liquidity score from 75 to 91, leaving it behind only South Africa and Madagascar on that measure. The increase matters because liquidity is what turns a formally open currency market into one that businesses and investors can actually use. If banks trade foreign currency regularly and in sufficient volumes, buyers and sellers can obtain more reliable prices, transactions can be completed with less disruption and individual orders are less likely to cause large movements in the exchange rate. In thinner markets, the opposite occurs: the legal framework may allow investors to convert currency, but the actual supply of dollars or other foreign currencies may be insufficient when demand rises. Uganda’s improvement therefore reflects activity rather than simply regulatory reform. Many African countries have liberalised their foreign exchange regimes and publish exchange rate information regularly, but the Absa index identifies deep interbank liquidity as one of the continent’s continuing weaknesses. Uganda is increasingly separating itself from that group by expanding the amount of currency traded between financial institutions. The contrast with Tanzania is particularly striking. Tanzania scores 60 overall for foreign exchange access and only 10 on the foreign exchange liquidity component, compared with Uganda’s overall score of 81 and liquidity score of 91. Kenya performs more strongly than Tanzania with an overall foreign exchange access score of 74, but Uganda still ranks significantly ahead. The numbers point to a regional market in which neighbouring economies can operate under relatively open currency regimes while producing very different levels of actual trading depth. Uganda’s FX Swap Market Has Become A Major Part Of The Story One of the largest changes has occurred outside the traditional spot foreign exchange market. Uganda has developed a much larger foreign exchange swap market, allowing financial institutions and investors to exchange currencies temporarily and reverse the transaction at an agreed future date. The Bank of Uganda says annual foreign exchange swap turnover increased by 168 percent between June 2022 and June 2026, rising from US$10.3 billion to US$27.5 billion. The scale of that expansion matters because swaps allow businesses, banks and investors to manage short term foreign currency requirements without permanently selling the underlying assets they hold. A financial institution expecting dollar inflows several months later, for example, can use a swap to obtain temporary foreign currency liquidity rather than liquidating other investments simply to meet immediate obligations. The same instruments can be used to hedge currency exposure and provide more reliable forward pricing. The Bank of Uganda began using foreign exchange swaps for open market operations in December 2025 and has signed International Swaps and Derivatives Association agreements with commercial banks, establishing more standardised contractual arrangements for these transactions. Turnover in the domestic swap market excluding Bank of Uganda operations increased by more than 50 percent in the year to June 2026. The central bank has also been developing a domestic foreign exchange swap curve with the London Stock Exchange Group to create a clearer benchmark for pricing future transactions. That infrastructure is economically important because a sophisticated foreign exchange market does more than provide dollars on demand. It allows businesses to manage when they need those dollars, at what price and for how long. Importers, exporters, banks, investors and eventually oil companies can therefore manage currency mismatches without relying entirely on immediate purchases in the spot market. The development of a daily swap curve also improves price discovery because market participants can observe how the cost of exchanging currencies varies across different periods. This gives investors and companies a clearer reference for valuing currency risk and reduces dependence on individually negotiated prices that may differ substantially between institutions. Uganda Has Chosen A Relatively Open Currency Regime The index gives Uganda a score of 97 for foreign exchange arrangements and controls, one of the highest among the 29 economies assessed. The Bank of Uganda attributes this performance to a long standing market based and liberalised currency regime in which central bank intervention is generally intended to smooth excessive volatility or accumulate reserves rather than maintain a rigid exchange rate. That policy choice is important for international investors because capital restrictions can substantially change the economics of an investment. An investor may earn an attractive return on a Ugandan government bond, equity or private business, but those returns become less valuable if converting the proceeds into dollars or transferring them abroad requires lengthy administrative procedures or exposes the investor to a parallel exchange rate. Uganda’s high score indicates that the formal barriers to moving foreign currency remain relatively limited. The country has also adopted a domestic foreign exchange code based on the Global FX Code, an international framework covering principles such as ethics, governance, execution, information sharing, risk management and settlement. Bank of Uganda’s Statement of Commitment was added to the Global FX Code register in November 2025. The significance is not that adherence to a code automatically eliminates currency risk. It is that an increasingly institutionalised market can reduce uncertainty around how transactions are executed and how counterparties behave, which becomes more important as foreign investors, banks and multinational companies undertake larger transactions. Uganda’s Weakness Is Still Its Foreign Exchange Reserve Buffer Uganda’s second place ranking comes with an important qualification. Its reserves remain below the level typically considered comfortable for absorbing external shocks. The index gives Uganda only 37 for reserve adequacy, with international reserves covering slightly less than three months of imports. Uganda is one of seven countries in the index below the three month threshold. The nominal position has nevertheless improved sharply. Gross international reserves increased from US$4.1 billion in June 2022 to US$6.7 billion in June 2026, an increase of approximately 64 percent. The Bank of Uganda attributes the increase to stronger foreign currency inflows and active reserve accumulation. The difference between the dollar value of reserves and import coverage is important. A country can accumulate more reserves but still record relatively modest months of import cover if its imports are also growing quickly. Uganda is expanding infrastructure and preparing for commercial oil production, processes that can increase imports of machinery, equipment and intermediate goods and therefore raise the amount of foreign exchange required to maintain the same reserve coverage ratio. The Bank of Uganda has attempted to strengthen reserves without relying heavily on outright dollar sales or currency restrictions. Its approach includes the Domestic Gold Purchase Programme, cross currency repurchase arrangements and other mechanisms intended to manage foreign exchange liquidity while protecting the central bank’s reserves. Future reserve accumulation is expected to draw on gold, remittances, foreign direct investment, exports and eventually oil related foreign currency inflows. This creates a useful distinction between Uganda and some other highly ranked markets. South Africa combines deep liquidity with a reserve adequacy score of 91, while Uganda’s market access is strong despite a considerably thinner external buffer. Uganda’s second place therefore reflects the quality and openness of its market infrastructure more than the size of the reserves standing behind it. Oil Could Change Uganda’s Foreign Exchange Position Uganda’s expected transition into commercial oil production could materially change the structure of its foreign exchange market if petroleum exports generate large and sustained dollar inflows. The Absa report already identifies expected oil earnings as one potential source of stronger reserve accumulation, while the country’s broader macroeconomic outlook assumes that commercial oil production will support growth and external earnings. The scale of that change will depend on how much foreign currency actually remains within the domestic financial system. Oil exports can generate billions of dollars, but companies also have foreign currency obligations covering imported equipment, debt repayment, dividends and other external costs. The central bank’s ability to accumulate reserves will therefore depend not simply on gross oil exports but on the balance between inflows and outflows across the petroleum sector and the wider economy. If oil strengthens reserves while Uganda retains the openness and liquidity that currently support its high foreign exchange ranking, the country could reduce one of the principal weaknesses identified in the 2026 index. A larger reserve buffer would allow the central bank to respond more effectively to periods of external pressure without resorting to restrictions that could undermine the accessibility investors currently value. There is also a potential domestic market effect. Larger foreign currency inflows create more trading opportunities for banks and other financial institutions, which can deepen spot, forward and swap markets if those flows are intermediated through the formal financial system. Uganda’s existing investment in swap infrastructure and interbank trading means the country may enter the oil era with a more developed foreign exchange market than many commodity exporters possessed when their own production began. Uganda’s Advantage Goes Beyond The Exchange Rate Foreign exchange discussions in East Africa frequently concentrate on whether a currency has strengthened or weakened against the dollar. That matters to importers, borrowers and households, but it is not the same thing as having a strong foreign exchange market. A currency can depreciate while the market through which it trades remains open, liquid and transparent. Conversely, a government can stabilise an exchange rate administratively while businesses struggle to obtain foreign currency at the official price. The Absa index attempts to capture this difference by evaluating liquidity, controls, reserves and reporting rather than simply measuring currency performance. Uganda’s second place therefore does not mean the Ugandan shilling is Africa’s second strongest currency, nor does it mean businesses are insulated from depreciation. It means Uganda has built one of the continent’s more accessible foreign exchange systems, where market participants have comparatively strong access to currency, instruments for managing risk and transparent information about the market. This distinction becomes increasingly important as Uganda seeks more foreign investment. An international investor assessing a Ugandan asset must consider the return available on the investment and the ability to move money into and out of the country. A functioning foreign exchange market reduces the probability that attractive returns become trapped in local currency when the investor wants to exit. Uganda Is Building A Wider Financial Market Around The Same Reforms The foreign exchange story also fits into Uganda’s broader financial market performance. The country ranks fourth overall in the 2026 Absa Africa Financial Markets Index with a score of 68, retaining its position from 2025. Its government bond yield curve has also been extended to 25 years, giving the market a longer benchmark for pricing government and private sector debt. The combination is significant because capital markets and foreign exchange markets reinforce each other. Foreign investors are more likely to participate in local currency bonds if they can hedge currency risk and reliably convert proceeds when they exit. A deeper bond market creates more assets for foreign investors to purchase, while a deeper foreign exchange market reduces one of the risks associated with holding them. Uganda is therefore building several components of financial market infrastructure simultaneously: longer maturity government securities, currency swaps, more active interbank foreign exchange trading, improved reserve management and increasingly standardised market rules. The remaining question is whether these improvements will translate into greater financing for the productive economy rather than remaining concentrated within banks and government securities. A deeper financial market ultimately matters because companies should be able to access capital, investors should be able to manage risk and domestic savings should be converted into investment more efficiently. The Uchumi360 Insight Uganda’s rise to second place in Africa for foreign exchange access is not principally a story about the Ugandan shilling. It is a story about the infrastructure surrounding the currency. Interbank turnover is rising, spot trading has expanded, foreign exchange swap activity has increased sharply, the Bank of Uganda has introduced swaps into monetary operations, international reserves have grown and the market operates under relatively open rules. Together, those changes have created a foreign exchange system in which businesses and investors have more options for obtaining currency and managing exchange rate risk. The weakness remains reserves. Uganda’s US$6.7 billion reserve stock is substantially larger than four years ago, but it still covers slightly less than three months of imports. Oil production could strengthen that position, but it will also introduce much larger foreign currency flows that the financial system will need to manage. Uganda is therefore entering its oil era with one financial advantage that receives far less attention than its crude reserves: one of Africa’s increasingly sophisticated foreign exchange markets. If the country can convert future oil inflows into stronger external buffers without sacrificing the openness and liquidity it has built, its position in African finance could become considerably more important than the size of its economy alone would suggest. FAQ Where does Uganda rank in Africa for foreign exchange access? Uganda ranks second among the 29 economies assessed in the 2026 Absa Africa Financial Markets Index, behind South Africa. Its foreign exchange access score increased by 12 points to 81. Why did Uganda’s ranking improve? The improvement was driven by deeper foreign exchange liquidity, increased interbank trading, growth in FX swaps, strong reporting standards and a relatively open foreign exchange regime. How large is Uganda’s foreign exchange market? Annual interbank turnover reached approximately US$5.8 billion in the year to June 2026, while total spot foreign exchange turnover reached US$41.1 billion. How large is Uganda’s FX swap market? The Bank of Uganda says annual FX swap turnover increased from US$10.3 billion in June 2022 to US$27.5 billion in June 2026, an increase of 168 percent. How much does Uganda hold in foreign exchange reserves? Gross international reserves stood at approximately US$6.7 billion in June 2026, up from US$4.1 billion in June 2022. Despite that increase, reserves still cover slightly less than three months of imports. Could Uganda’s oil production improve its foreign exchange position? Yes. Future oil exports could provide an additional source of foreign currency and help strengthen reserves, although the net effect will depend on the balance between petroleum export earnings and the sector’s own foreign currency obligations.