Africa-Press – Uganda. Uganda’s domestic debt market remained robust in June 2025, with the government raising Shs 1.86 trillion through three auctions of Treasury Bills and Bonds, according to the Ministry of Finance’s latest Performance of the Economy Report.
Of the total amount raised, Shs 393.09 billion was used to refinance maturing obligations, while a larger share—Shs1.47 trillion—was directed toward funding the national budget.
The figures underscore the government’s growing reliance on domestic borrowing to plug fiscal deficits amid shrinking external inflows and heightened spending pressures.
Despite fluctuations in interest rates, investor appetite remained strong across all auctions. Treasury Bill issuances were oversubscribed, with an average bid-to-cover ratio of 1.55, indicating sustained market confidence in government securities.
Yields, however, moved in mixed directions. The interest rate on the 364-day Treasury Bill climbed to 15.6% in June, up from 15.4% in May, while the 182-day Bill rose to 12.8% from 12.7%.
The 91-day Bill yield, by contrast, edged slightly down to 12.0% from 12.1%, suggesting short-term market optimism or greater demand for shorter-term instruments.
Yields on longer-term Treasury Bonds also inched up. The 5-year bond rose to 16.8% from 16.7%, while the 15-year bond increased to 17.8% from 17.7%.
The two-year bond yield held steady at 15.75% for the third consecutive month.
Finance Minister Matia Kasaija, commenting on the performance, reaffirmed the government’s commitment to prudent debt management.
“Government recognizes the critical role of the domestic debt market in bridging fiscal gaps, especially in an environment of subdued external inflows.
However, we remain committed to managing this debt prudently and ensuring that our borrowing supports long-term economic stability,” Kasaija said.
While the oversubscription reflects investor trust in government paper, economic analysts cautioned that the rise in domestic yields may raise Uganda’s debt servicing burden and crowd out private sector borrowing.
“Excessive reliance on domestic debt risks limiting access to credit for the productive sectors that are crucial for economic growth,” an analyst noted.
Uganda’s borrowing strategy is increasingly driven by the need to finance infrastructure, service existing debt, and fund critical social programs. However, experts stress that sustainable economic recovery will require a balance between domestic resource mobilization and policies that encourage private sector-led growth.
As the country transitions into the 2025/26 fiscal year, fiscal consolidation, tighter coordination with monetary policy, and improved debt transparency will be key to maintaining macroeconomic stability and taming inflation.
The Performance of the Economy Report also called for reforms to deepen and diversify Uganda’s domestic debt market.
These include broadening the investor base, strengthening secondary market operations, and enhancing transparency in debt issuance.
“While the domestic market continues to provide reliable financing, the cost of borrowing is rising. Therefore, prudent management of these resources and ensuring their effective use in growth-enhancing projects is more critical than ever,” the report stated.
Uganda’s June debt performance highlights both the resilience and the challenges of its domestic financing strategy.
High subscription levels point to strong investor confidence, but rising yields serve as a warning about the long-term costs of borrowing.
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