Bank Of Uganda Awaits Cabinet Decision On Diaspora Bond

Bank of Uganda, the country’s central bank has said it is waiting on cabinet to approve the proposed Diaspora bond before it could be presented before parliament and eventually introduced to Ugandans living and working abroad.

Government expects to introduce the bond among the Diaspora in a bid to secure an alternative innovative source of funding it could use to bridge a shortfall estimated at over 15 billion dollars. A bond is an arrangement in which one loans money to an entity such as government for a defined period of time at a fixed interest rate.

Jan Tibamwenda, the Head of Communications at Bank of Uganda, told the media that a recent study found that up to 68 percent of money remitted by Ugandans in the Diaspora is used for consumption meaning there is yet no mass for a purely international Diaspora bond. As a result, he said the study proposed that government should issue a hybrid Diaspora bond comprising government issued local, regional and Euro bonds with a specific portion dedicated to retail Diaspora investors instead of a purely international Diaspora bond.

According to the United Nations Development Program, Ugandans abroad remitted 768 million dollars in 2010, a sign that government could target the Diaspora with the a bond whose proceeds would facilitate investment in priority sectors of the economy to aid development.

Tibamwneda explained that government is considering a three phased approach for issuing the Diaspora bonds. He said a local infrastructure Bond with a Diaspora component would be introduced in the short term followed by regional and Euro infrastructure Bond with a Diaspora Component in the medium-term before an International Diaspora Bond in the international financial markets in the long-term.

He said phase one of the Diaspora bond plan is scheduled to run from June 2013 to January 2016. He however added that Bank of Uganda was still working with partners such as commercial banks to incorporate a Diaspora component in all government bonds currently issued by the central bank before a fully fledged pure Diaspora bond is considered in future.

Tibamwenda explained that the bank also plans to register all Diaspora investors and provide sensitization on the need to invest in government securities. According to Job Elogu, the head of the Diaspora Unit at the Ministry of Foreign Affairs, there are about 1.5 million Ugandans living and working abroad.

2 thoughts on “Bank Of Uganda Awaits Cabinet Decision On Diaspora Bond

  1. Diaspora money could be a relief to the government. Unfortunately for Ugandan diaporas doing business in Uganda is difficult due to corruption and the very fact that foreigner are given priority over us.Most Ugandans I know hold comfortable positions but when you talk about investment back home you will here how each has been cheated by relative ,friends or even investors not only once but more than three times,how impossible it is to do things without technical know who,bribery and most important personal security. So all these factors don’t favor us. Transparency is important and when we read cases like NAADS,OPM where people steal with impunity how do you expect me to invest my clean money in such a structure of money sharks! Here you can buy stocks,gold ,Platinum or get companies that will guarantee you a monthly dividend on maybe say 10,000$ but the situation at home is draconian and laws change over night so the risk is very high to lose my savings.

  2. It is unimaginable for most of us living in the Diaspora, with
    some understanding of financial markets and investment; with good
    conscience to even consider purchasing Uganda Government bonds in a
    country with a political environment where there is continued
    suppression of parliamentary democracy and now heavily down on the
    freedom of the PRESS in every conceivable way to include as an
    example; a simple communications piece as a “poster” incident in
    a recent case in mind. To invest in Uganda Government bonds,
    treasuries and similar instruments would only help add more fuel to
    that very people-suppression machine. Until there is true democracy
    and respect for the “rights and freedoms” of the Ugandan people,
    any man or woman of good conscience would stay on the sidelines. Most
    Ugandans in the Diaspora would like to contribute to Uganda’s
    development in every possible way given the right political
    environment for the people of Uganda. This basic fundamental analysis
    issue alone still puts any potential seasoned investor’s
    risk-to-reward ratio in red territory. It seems there is a big
    disconnect between the political environment being cultivated by the
    powers be and what the Government’s sees as an ideal investor attraction environment.
    If I were the Government in Myanmar Burma 20 years ago, then may be I
    would be comfortable investing in Uganda. Shutting down freedom of
    expression amongst other freedoms does not make the country
    attractive to foreign investors, all it does is sweep the dirt under
    the rug and expect that somehow someone will be hoodwinked to think
    that Uganda is a safe place to invest.

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