In practice, we have a deposit rate set at 200 basis points below repo, which functions as a floor for the system – it is essentially a sterilisation instrument.15 As predicted by theory, we have therefore seen actual short-term rates fluctuate between the repo rate and this deposit rate, although they have mostly stayed close to the repo rate.
Over the last decade, we have achieved substantial progress in promoting the growth of the domestic capital markets, for both bonds and equities. Uganda is now regarded as a “frontier market”, because the country is able to attract portfolio investment from abroad into its capital and money markets. Therefore, we are well and truly on the road to becoming an emerging market.