## _wp1218

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---

### Methodology
- Beta (β) convergence:
  - Measured by panel regression of changes in spreads of yields between country i and benchmark (Kenya) with three-month lags (equation (1)).
  - Negative β indicates mean reversion; absolute value represents speed of convergence. γl measure lagging effects.
- Sigma (σ) convergence:
  - Cross-sectional standard deviation of yields across countries at each time (equation (2)).
  - Regress σt on a linear time trend to assess whether dispersion is decreasing over time.
- Cointegration analysis:
  - Error-correction model with l lags (equation (3)); identify r, the number of cointegrating vectors.
  - Johansen trace and maximum-eigenvalue statistics used to infer r.

### Data
- EAC debt markets:
  - Monthly 91-day treasury bill rates for Kenya, Tanzania, and Uganda from IMF African Department database.
  - For Rwanda, weighted average interest rates of 28-, 91-, 182-, and 364-day treasury bills used (91-day series available only after 2009).
  - Burundi dropped due to data unavailability.
  - Treasury bill dataset: 440 observations, September 2001 to December 2010.
  - Interbank rates: monthly data January 2001 to December 2010 (480 observations).
- Stock markets:
  - Monthly averages of NSE 20 Share Index, DSE All Share Index, USE All Share Index from Bloomberg.
  - Rwanda excluded (RSE has only three companies listed), Burundi excluded (no stock market).
  - Study period November 2003 to December 2010; DSE All Share Index available only after December 2006, resulting in 221 observations.
  - Indices converted to US dollar spot rates; stock returns computed as log differences.
- Pretests for cointegration:
  - Augmented Dickey-Fuller and Phillips-Perron tests: all stock price series integrated of order one.
  - Lag of one chosen to minimize the Shwartz information criterion.
  - Results robust to exchange-rate adjustment and to biweekly data.

### Results — EAC Debt Markets (Treasury Bills)
- Beta convergence:
  - Panel OLS β = -0.076 (standard errors in table).
  - Coefficients negative and statistically significant across OLS, fixed effects, and random effects.
  - Estimated half-life of deviations: 9 months (half-life calculated as ln(0.5)/ln(1+β)).
  - Fixed effects model implies no significant difference in β across countries.
  - Individual regressions for Rwanda, Tanzania, Uganda consistent except Uganda’s β not statistically significant.
- Sigma convergence:
  - σt regression results for treasury bill markets:
    - Before July 2007: σ coefficient = -0.029 ***
    - After July 2007: σ coefficient = -0.001 (insignificant)
  - Interpretation:
    - Dispersion decreased since 2001 but progress stagnated in recent years.
    - Possible increasing dispersion in Rwanda and Uganda in the last three years.

### Results — EAC Interbank Markets
- Beta convergence:
  - Panel OLS β = -0.107 (negative and statistically significant across models).
  - Implied half-life: approximately 6 months (faster than treasury bill markets).
  - Comparison with other regions:
    - EU interbank markets: 23-month half-life (Adam and others, 2002).
    - GCC markets: half-life ranging from 3.6 to 5.5 months (Espinoza, Prasad, and Williams, 2010).
  - EAC beta coefficients relatively large partly due to large constants (~0.2 in EAC, compared to 0.097 in EU and between -0.077 and 0.033 in GCC).
- Sigma convergence:
  - σt regression results for interbank markets:
    - Before July 2007: σ coefficient = -0.052 ***
    - After July 2007: σ coefficient = 0.004 (insignificant)
  - Interpretation: cross-sectional dispersion decreased initially but stagnated after July 2007.

### Results — EAC Stock Markets: Beta and Sigma Convergence
- Beta convergence:
  - Panel regression β = -0.529 (negative and significant).
  - Implied half-life: less than a month.
  - Individual regressions:
    - Uganda–Kenya half-life: 0.4 month (stronger integration with Kenya).
    - Tanzania–Kenya half-life: 1 month.
  - Fixed effects model indicates no significant difference in β convergence between Uganda and Tanzania.
- Sigma convergence:
  - σt regressed on linear time trend: coefficient on σ not statistically significant (though negative).
  - Interpretation:
    - Slight reduction in dispersion over time but not statistically significant.
    - Integration of stock markets appears to have stagnated in recent years.
    - Dispersion between Tanzania and Kenya larger than between Uganda and Kenya, reflecting Tanzania’s relative insulation from the global financial crisis and more stringent cross-border investment regulations.

### Results — EAC Stock Markets: Cointegration Analysis
- Pretests:
  - All stock price series contain unit roots (I(1)); lag length = 1.
  - Results robust to exchange-rate adjustment.
- Johansen trace tests:
  - No cointegration vector found among the EAC stock markets.
  - Conclusion robust using maximum-eigenvalue statistics and whether series are adjusted for exchange rates.
  - Biweekly data with double the number of observations produced the same result.
- Final practical implication: there is no cointegration vector in EAC stock prices.

### Summary and interpretation of empirical results
- Main findings:
  - Beta convergence is taking place in the EAC financial markets.
  - This contradicts IMF (2009), attributed to IMF (2009) using 46 observations versus this study’s larger samples.
  - Within the region:
    - Beta convergence in the stock markets has a half-life of less than a month.
    - Beta convergence in the treasury bills markets has a half-life of about 9-month.
- Caveats:
  - Estimated beta convergence may partly reflect each market’s response to outside shocks (spurious relationship) rather than genuine regional convergence.
  - Data series may not perfectly reflect market developments because numbers of listed companies and transactions are small; monthly averages are computed from daily data and biweekly data were also used with the conclusion unchanged.
- Cointegration and sigma conclusions:
  - Cointegration analysis indicates there is no long-run equilibrium among the EAC stock markets (i.e., no cointegration vector). Given no long-run relationship, estimated beta convergence in the stock markets should not be accepted at face value.
  - Sigma convergence indicates financial integration has not deepened in the EAC during the past few years.
  - Decrease in dispersion before 2007, especially in the treasury bill and interbank markets, is attributed to more stable fiscal and monetary policies rather than deeper financial integration.
  - The trend stagnated amid the global financial crisis and political turmoil in Kenya; some markets show signs of increasing divergence.
  - Persistent dispersion reflects underlying country-specific risks (political risks, foreign exchange risks) preventing realization of the law of one price.

### Selected regression/table excerpts (as presented in source)
- σ-0.030-0.039-0.007 (0.022)(0.032)(0.006)
- Constant 4.753*** 5.571*** 2.470*** (0.755)(1.056)(0.333)
- Observation 48
- R-squared 0.026
- Note: The regressions are estimated with OLS, using the explanatory variable of a linear time trend. Figures in brackets are standard errors. *** denotes significant at the 0.1 percent, ** at the 1 percent, and * at the 5 percent levels.
- Cointegration test annotation: Note: * denotes the number of cointegrating vectors suggested by the statistics. (Adjusted for Exchange Rates / Not Adjusted for Exchange Rates presented in source.)

### Policy implications for better integrated capital markets
- Accelerated efforts are needed to integrate government debt markets, especially given the ambitious target of starting a monetary union by 2012.
- A too hasty move toward fully integrated markets without accommodating gaps (resources, capacity) would result in inefficient and illiquid markets and hamper monetary union conduct.
- Relatively small gaps in EAC government debt markets (functioning markets in all five countries) suggest room to accelerate integration.

### Strategies toward integrated government debt markets
- Two broad approaches:
  - Institution-based approach: institutionally integrate local markets under unified supranational regulations and supervisors (merge local markets into one regional market regulated by a common regional authority).
  - Non-institution-based approach: realize equalized returns across economies through massive cross-border financial flows and cross-listings while preserving national sovereignty and harmonizing regulatory frameworks and market infrastructure.
- Illustrations:
  - WAEMU (institution-based): regional securities exchange (BRVM), regional securities commission (CREPMF), unified auction system by a common central bank (BCEAO); issuance of debt securities increased by 15 times since 2001.
  - ASEAN/ABMI (non-institution-based): market size increased from $218 million outstanding in 2000 to $845 million in 2010; focus on harmonizing market infrastructure and facilitating local currency bond issuance.
- Sequencing recommendation:
  - The two approaches are not mutually exclusive; policy makers should choose sequencing or combinations appropriate to their political costs and time horizons.
  - Entrenched noninstitutional integration can facilitate transition to institutionalized integration.

### Policy recommendations (four common actions)
- Further harmonize market infrastructure, facilitating cross-border transactions:
  - Examples: unified systems for issuing, distributing, and settling debt securities; regional clearing and settlement mechanisms; harmonized credit rating systems; regional information dissemination platforms.
  - In the EAC, more harmonization is needed in auction mechanisms of treasury bills and establishment of regional clearing and settlement systems. Member states should ensure new regulations and trading facilities conform to regional standards or best practice.
- Strengthen regional surveillance mechanisms:
  - Macroeconomic stability is fundamental for cross-border investments.
  - EAC has convergence criteria toward monetary union, but performance is mixed with convergence of fiscal deficits excluding grants and inflation persistently exceeding targets.
  - Consider assigning the EAC secretariat a formal function of assessing and reporting developments under the criteria, while enhancing the secretariat’s capacity and ensuring submitted economic data are well defined and comprehensive.
- Encourage local currency bond issuance by multilateral financial institutions:
  - Examples: IFC floated its first local currency bond issue in sub-Saharan Africa equivalent to $44.6 million in the BRVM at end-2006; West African Development Bank accounted for 6.5 percent of total bonds outstanding in the market at end-2010.
  - Benefits: issue high-rated bonds denominated in local currency without influencing countries’ debt positions; provide benchmark transactions; attract investors.
  - Caution: large bond issues could crowd out government domestic financing in narrow markets; risk can be minimized by regional investor interest and consultation on amounts/timing.
  - Note: East African Development Bank amount outstanding stands at $8.6 million as of end-2010. IFC was granted approval to issue and list a K Sh3 billion (about $37 million) bond on the NSE in August 2010.
- Build capacity of existing regional institutions:
  - Strong regional institutions are crucial for implementing recommendations; roles differ by chosen strategy.
  - EAC regional bodies (e.g., secretariat) face significant budget and human resource constraints; authorities could consider enhancing their capacity.
  - Strengthening regional institutions helps fill capacity gaps among member states.

### Conclusion — key takeaways
- EAC capital markets are underdeveloped with significant divergence across the region:
  - Government debt markets functional in all EAC countries; market size ranges from 2.2 percent of GDP in Rwanda to 27.3 percent in Kenya.
  - Kenya has a relatively advanced stock market for sub-Saharan Africa; Rwanda and Burundi have no stock exchange.
  - Markets face low capitalization and liquidity; issuers largely public institutions and foreign-affiliated banks; investors dominated by commercial banks and local pension funds.
- Integration efforts:
  - Uganda, Kenya, and Rwanda have fully liberalized capital transactions across the region; Tanzania and Burundi are obliged to do so by 2015.
  - Progress includes common procedure for cross-border listings; further work needed on taxes, financial reporting, trading systems, and financial education.
- Empirical findings restated:
  - Estimated beta convergence indicates convergence of interest rates and stock returns among treasury bill markets of Kenya, Rwanda, Tanzania, and Uganda, and stock markets of Kenya, Tanzania, and Uganda.
  - Sigma convergence suggests financial integration has not deepened in recent years and some countries show increasing divergence.
  - Cointegration analysis suggests there exists no long-run cointegration relationship in the EAC stock markets (no cointegration vector).
- Implementation:
  - The four recommended actions (harmonize market infrastructure; strengthen surveillance; encourage multilateral local-currency issuance; strengthen regional institutions) apply regardless of pursuing institution-based or non-institution-based integration and can be advanced separately from monetary union negotiations.

*Source: _wp1218 - conclusion that there is no cointegration vector in EAC stock prices.*

### 2010. Kenya, Uganda, and Tanzania are working toward demutualizing their respective stock

### 2010. Kenya, Uganda, and Tanzania are working toward demutualizing their respective stock exchanges, and merging them into a single regional stock exchange in the future.

### Methodology
- Beta (β) convergence:
  - Measured by panel regression of changes in spreads of yields between country i and benchmark (Kenya) with three-month lags (equation (1)).
  - Negative β indicates mean reversion; absolute value represents speed of convergence. γl measure lagging effects.
- Sigma (σ) convergence:
  - Cross-sectional standard deviation of yields across countries at each time (equation (2)).
  - Regress σt on a linear time trend to assess whether dispersion is decreasing over time.
- Cointegration analysis:
  - Error-correction model with l lags (equation (3)); identify r, the number of cointegrating vectors.
  - Johansen trace and maximum-eigenvalue statistics used to infer r.

### Data
- EAC debt markets:
  - Monthly 91-day treasury bill rates for Kenya, Tanzania, and Uganda from IMF African Department database.
  - For Rwanda, weighted average interest rates of 28-, 91-, 182-, and 364-day treasury bills used (91-day series available only after 2009).
  - Burundi dropped due to data unavailability.
  - Treasury bill dataset: 440 observations, September 2001 to December 2010.
  - Interbank rates: monthly data January 2001 to December 2010 (480 observations).
- Stock markets:
  - Monthly averages of NSE 20 Share Index, DSE All Share Index, USE All Share Index from Bloomberg.
  - Rwanda excluded (RSE has only three companies listed), Burundi excluded (no stock market).
  - Study period November 2003 to December 2010; DSE All Share Index available only after December 2006, resulting in 221 observations.
  - Indices converted to US dollar spot rates; stock returns computed as log differences.
- Pretests for cointegration:
  - Augmented Dickey-Fuller and Phillips-Perron tests: all stock price series integrated of order one.
  - Lag of one chosen to minimize the Shwartz information criterion.
  - Results robust to exchange-rate adjustment and to biweekly data.

### Results — EAC Debt Markets (Treasury Bills)
- Beta convergence (Table 6):
  - Panel OLS β = -0.076 (standard errors in table).
  - Coefficients negative and statistically significant across OLS, fixed effects, and random effects.
  - Estimated half-life of deviations: 9 months (half-life calculated as ln(0.5)/ln(1+β)).
  - Fixed effects model implies no significant difference in β across countries.
  - Individual regressions for Rwanda, Tanzania, Uganda consistent except Uganda’s β not statistically significant.
- Sigma convergence (Figure 3 and Table 8):
  - σt regression results for treasury bill markets:
    - Before July 2007: σ coefficient = -0.029 ***
    - After July 2007: σ coefficient = -0.001 (insignificant)
  - Interpretation: dispersion decreased since 2001 but progress stagnated in recent years; possible increasing dispersion in Rwanda and Uganda in the last three years.

### Results — EAC Interbank Markets
- Beta convergence (Table 7):
  - Panel OLS β = -0.107 (negative and statistically significant across models).
  - Implied half-life: approximately 6 months (faster than treasury bill markets).
  - Comparison with other regions:
    - EU interbank markets: 23-month half-life (Adam and others, 2002).
    - GCC markets: half-life ranging from 3.6 to 5.5 months (Espinoza, Prasad, and Williams, 2010).
  - EAC beta coefficients relatively large partly due to large constants (~0.2 in EAC, compared to 0.097 in EU and between -0.077 and 0.033 in GCC).
- Sigma convergence (Figure 3 and Table 8):
  - σt regression results for interbank markets:
    - Before July 2007: σ coefficient = -0.052 ***
    - After July 2007: σ coefficient = 0.004 (insignificant)
  - Interpretation: cross-sectional dispersion decreased initially but stagnated after July 2007.

### Results — EAC Stock Markets: Beta and Sigma Convergence
- Beta convergence (Table 9):
  - Panel regression β = -0.529 (negative and significant).
  - Implied half-life: less than a month.
  - Individual regressions:
    - Uganda–Kenya half-life: 0.4 month (stronger integration with Kenya).
    - Tanzania–Kenya half-life: 1 month.
  - Fixed effects model indicates no significant difference in β convergence between Uganda and Tanzania.
- Sigma convergence (Figure 4 and Table 10):
  - σt regressed on linear time trend: coefficient on σ not statistically significant (though negative).
  - Interpretation: slight reduction in dispersion over time but not statistically significant; integration of stock markets appears to have stagnated in recent years.
  - Dispersion between Tanzania and Kenya larger than between Uganda and Kenya, reflecting Tanzania’s relative insulation from the global financial crisis and more stringent cross-border investment regulations.

### Results — EAC Stock Markets: Cointegration Analysis
- Pretests:
  - All stock price series contain unit roots (I(1)); lag length = 1.
  - Results robust to exchange-rate adjustment.
- Johansen trace tests (Table 11):
  - No cointegration vector found among the EAC stock markets.
  - Conclusion robust using maximum-eigenvalue statistics and whether series are adjusted for exchange rates.
  - Biweekly data with double the number of observations produced the same result.

*Source: IMF, African Department database; Bloomberg; and author's estimates as presented in the source content.*

### conclusion that there is no cointegration vector in EAC stock prices.

### conclusion that there is no cointegration vector in EAC stock prices.

### Summary and interpretation of empirical results
- Beta convergence is taking place in the EAC financial markets.
- This finding contradicts IMF (2009), which finds that convergence is not taking place in the EAC treasury bond markets; the difference is attributed to IMF (2009) using a much smaller number of observations (46).
- Within the region:
  - Beta convergence in the stock markets has a half-life of less than a month.
  - Beta convergence in the treasury bills markets has a half-life of about 9-month.
- Two caveats affecting interpretation of beta convergence results:
  - The estimated beta convergence may partly reflect each market’s response to outside shocks (spurious relationship) rather than genuine regional convergence.
  - Data series may not perfectly reflect market developments because the numbers of listed companies and transactions are small; monthly averages are computed from daily data and biweekly data were also used with the conclusion unchanged.
- Cointegration analysis result:
  - The cointegration analysis indicates there is no long-run equilibrium among the EAC stock markets (i.e., no cointegration vector).
  - Given no long-run relationship, estimated beta convergence in the stock markets should not be accepted at face value.
- Sigma convergence:
  - Measured sigma convergence indicates that financial integration has not deepened in the EAC during the past few years.
  - A decrease in dispersion before 2007, especially in the treasury bill and interbank markets, is attributed to more stable fiscal and monetary policies rather than deeper financial integration.
  - This trend stagnated amid the global financial crisis and political turmoil in Kenya; some markets show signs of increasing divergence.
  - Persistent dispersion reflects underlying country-specific risks (political risks, foreign exchange risks) preventing realization of the law of one price.

- Selected regression/table excerpts (as presented in source):
  - σ-0.030-0.039-0.007 (0.022)(0.032)(0.006)
  - Constant 4.753*** 5.571*** 2.470*** (0.755)(1.056)(0.333)
  - Observation 48
  - R-squared 0.026
  - Note: The regressions are estimated with OLS, using the explanatory variable of a linear time trend. Figures in brackets are standard errors. *** denotes significant at the 0.1 percent, ** at the 1 percent, and * at the 5 percent levels.
  - Cointegration test annotation: Note: * denotes the number of cointegrating vectors suggested by the statistics. (Adjusted for Exchange Rates / Not Adjusted for Exchange Rates presented in source.)

### Policy implications for better integrated capital markets
- Accelerated efforts are needed to integrate government debt markets, especially given the ambitious target of starting a monetary union by 2012.
- A too hasty move toward fully integrated markets without accommodating gaps (resources, capacity) would result in inefficient and illiquid markets and hamper monetary union conduct.
- Relatively small gaps in EAC government debt markets (functioning markets in all five countries) suggest room to accelerate integration.

### Strategies toward integrated government debt markets
- Two broad approaches:
  - Institution-based approach: institutionally integrate local markets under unified supranational regulations and supervisors (merge local markets into one regional market regulated by a common regional authority).
  - Non-institution-based approach: realize equalized returns across economies through massive cross-border financial flows and cross-listings while preserving national sovereignty and harmonizing regulatory frameworks and market infrastructure.
- Illustration from other regions:
  - WAEMU (institution-based): regional securities exchange (BRVM), regional securities commission (CREPMF), unified auction system by a common central bank (BCEAO); issuance of debt securities increased by 15 times since 2001.
  - ASEAN/ABMI (non-institution-based): market size increased from $218 million outstanding in 2000 to $845 million in 2010; focus on harmonizing market infrastructure and facilitating local currency bond issuance.
- Recommendation on sequencing:
  - The two approaches are not mutually exclusive; policy makers should choose sequencing or combinations appropriate to their political costs and time horizons.
  - Entrenched noninstitutional integration can facilitate transition to institutionalized integration.

### Policy recommendations (four common actions)
- Further harmonize market infrastructure, facilitating cross-border transactions:
  - Examples: unified systems for issuing, distributing, and settling debt securities; regional clearing and settlement mechanisms; harmonized credit rating systems; regional information dissemination platforms.
  - In the EAC, more harmonization is needed in auction mechanisms of treasury bills and establishment of regional clearing and settlement systems. Member states should ensure new regulations and trading facilities conform to regional standards or best practice.
- Strengthen regional surveillance mechanisms:
  - Macroeconomic stability is fundamental for cross-border investments.
  - EAC has convergence criteria toward monetary union, but performance is mixed with convergence of fiscal deficits excluding grants and inflation persistently exceeding targets.
  - Consider assigning the EAC secretariat a formal function of assessing and reporting developments under the criteria, while enhancing the secretariat’s capacity and ensuring submitted economic data are well defined and comprehensive.
- Encourage local currency bond issuance by multilateral financial institutions:
  - Examples: IFC floated its first local currency bond issue in sub-Saharan Africa equivalent to $44.6 million in the BRVM at end-2006; West African Development Bank accounted for 6.5 percent of total bonds outstanding in the market at end-2010.
  - Benefits: issue high-rated bonds denominated in local currency without influencing countries’ debt positions; provide benchmark transactions; attract investors.
  - Caution: large bond issues could crowd out government domestic financing in narrow markets; risk can be minimized by regional investor interest and consultation on amounts/timing.
  - Note: East African Development Bank amount outstanding stands at $8.6 million as of end-2010. IFC was granted approval to issue and list a K Sh3 billion (about $37 million) bond on the NSE in August 2010.
- Build capacity of existing regional institutions:
  - Strong regional institutions are crucial for implementing recommendations; roles differ by chosen strategy.
  - EAC regional bodies (e.g., secretariat) face significant budget and human resource constraints; authorities could consider enhancing their capacity.
  - Strengthening regional institutions helps fill capacity gaps among member states.

### Conclusion (key takeaways)
- EAC capital markets are underdeveloped with significant divergence across the region:
  - Government debt markets functional in all EAC countries; market size ranges from 2.2 percent of GDP in Rwanda to 27.3 percent in Kenya.
  - Kenya has a relatively advanced stock market for sub-Saharan Africa; Rwanda and Burundi have no stock exchange.
  - Markets face low capitalization and liquidity; issuers largely public institutions and foreign-affiliated banks; investors dominated by commercial banks and local pension funds.
- Integration efforts:
  - Uganda, Kenya, and Rwanda have fully liberalized capital transactions across the region; Tanzania and Burundi are obliged to do so by 2015.
  - Progress includes common procedure for cross-border listings; further work needed on taxes, financial reporting, trading systems, and financial education.
- Empirical findings restated:
  - Estimated beta convergence indicates convergence of interest rates and stock returns among treasury bill markets of Kenya, Rwanda, Tanzania, and Uganda, and stock markets of Kenya, Tanzania, and Uganda.
  - Sigma convergence suggests financial integration has not deepened in recent years and some countries show increasing divergence.
  - Cointegration analysis suggests there exists no long-run cointegration relationship in the EAC stock markets (no cointegration vector).
- The four recommended actions (harmonize market infrastructure; strengthen surveillance; encourage multilateral local-currency issuance; strengthen regional institutions) apply regardless of pursuing institution-based or non-institution-based integration and can be advanced separately from monetary union negotiations.

*Source: _wp1218 - conclusion that there is no cointegration vector in EAC stock prices.*

### References

_wp1218 - References

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- International Monetary Fund (IMF), 2008, Regional Economic Outlook: Sub-Saharan Africa, April 2008 (Washington: International Monetary Fund).
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### Annex 1. EAC: Controls on Equity and Debt Transactions
- Table headers / country columns: Burundi Kenya Rwanda Tanzania Uganda
- Equities — Nonresidents:
  - Burundi: controls - Purchases may be effected in foreign exchange or in Burundi francs of lawful origin.
  - Kenya: controls - Foreign investors are not allowed to hold 60 percent or more of equities of a listed company. East African investors are treated as local investors. - Local issuance of securities by nonresidents requires approval of the authority.
  - Rwanda: no controls
  - Tanzania: controls - Nonresidents are allowed to participate in the market up to 60 percent of total equities issued by an issuer. - Foreign companies from the EAC may issue securities to the public and be cross-listed at the stock exchange, subject to approval of the authority.
  - Uganda: no controls
- Equities — Residents:
  - Burundi: controls - Purchase of foreign securities by residents requires authorities' approval.
  - Kenya: controls - Sale or issance of securities abroad by residents requries authorities'approval.
  - Rwanda: no controls
  - Tanzania: controls - Purchase of foreign securities by residents is permitted, provided such equities are acquired by externally generated funds. Such purchase must be reported. - Sale or issue of securities abroad by residents requires approval of the authority.
  - Uganda: no controls
- Debt Securities — Nonresidents:
  - Burundi: controls - Purchases may be made with nonresidents' own foreign exchange funds or in Burundi francs of lawful origin.
  - Kenya: controls - The same regulations on euiqty apply.
  - Rwanda: no controls
  - Tanzania: controls - Nonresidents are not permitted to hold government securities. - Purchase of bonds on the stock exchange by a foreign investor is subject to a limit of 60 percent of total securities issued by an issuer. - Sale or issue of debt securities by nonresidents is not permitted.
  - Uganda: no controls
- Debt Securities — Residents:
  - Burundi: controls - Sale or issue of bonds abroad requires authorities' approval.
  - Kenya: controls - The same regulations on equity apply.
  - Rwanda: no controls
  - Tanzania: controls - Purchase of securities abroad by residents is allowed only if funded fully by external sources and must be reported. - Sale or purchase of securities abroad by residents requires authorities' approval.
  - Uganda: no controls
- Sources : IMF, Annual Report on Exchange Arrangements and Exchange Restrictions 2010; and EAC, Annex VI to the Common Market Protocol, Schedule on the Removal of Restrictions on the Free Movement of Capital.

*End of _wp1218 - References*

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