Uganda, once sidelined from major global funding channels, has quickly become one of the hottest destinations for investors seeking high returns in frontier markets. Offshore investors now hold more than $2 billion worth of Uganda’s domestic government bonds—a record—amid a broader wave of capital flowing into riskier local currency debt across emerging economies such as Egypt, Nigeria, and Kazakhstan. Analysts attribute this surge to excess global liquidity, renewed appetite for risk, and declining confidence in traditionally safer assets in developed markets.
The shift comes despite Uganda’s recent challenges, including a two-year freeze in World Bank funding over an anti-LGBTQ law. With funding resumed in June, international interest has accelerated, pushing non-resident holdings in Uganda’s domestic debt to an estimated $2.7 billion, or around 12% of total government debt, according to S&P Global. Portfolio managers cite Uganda’s credible central bank, stable currency environment, and prudent policymaking as key draws, though they caution that hedge fund–driven “hot money” can exit as fast as it enters. Political uncertainty ahead of the January election, where long-time President Yoweri Museveni is expected to run again, adds another layer of risk.
Globally, frontier markets are benefiting from a favourable macro backdrop marked by a weak U.S. dollar, stable bond markets, and strong equities. The JPMorgan emerging market local currency bond index recently hit an all-time high, with banks such as Bank of America calling the environment “as good as it gets” for frontier assets. Countries like Nigeria, Paraguay, and the Dominican Republic have seen strong performance, though analysts warn that fading global growth or a strengthening dollar could reverse the momentum and trigger rapid outflows from frontier markets.
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