BoU raises Shs 1.86trn from treasury bills and bonds in June 2025
Of the total amount raised, Shs 393.09 billion was used to refinance maturing debt, while the larger portion [Shs 1.47 trillion] was channeled to support the national budget, reflecting the government’s continued reliance on domestic borrowing to plug fiscal gaps. Interest rates on government securities saw mixed movemen
KAMPALA, July 24, 2025 — Uganda’s domestic debt market remained active in June 2025, with the government through Bank of Uganda [BoU] raising Shs 1.86 trillion from three auctions of treasury bills and bonds, according to the June 2025 Performance of the Economy Report issued by the Ministry of Finance, Planning and Economic Development.
Of the total amount raised, Shs 393.09 billion was used to refinance maturing debt, while the larger portion [Shs 1.47 trillion] was channeled to support the national budget, reflecting the government’s continued reliance on domestic borrowing to plug fiscal gaps.
Interest rates on government securities saw mixed movements. The 364-day and 182-day treasury bills rose to 15.6 percent and 12.8 percent in June from 15.4 percent and 12.7 percent in May, respectively, suggesting rising investor risk perceptions or tighter liquidity conditions.
However, the 91-day bill yield slightly declined to 12.0 percent, down from 12.1 percent in May, likely reflecting short-term market optimism or a surge in investor demand for shorter tenors.
Despite rate fluctuations, all treasury bill auctions remained oversubscribed, with an average bid-to-cover ratio of 1.55, a key indicator of strong market interest.
Longer-term Treasury Bonds also saw upward movement in yields. The 5-year bond rose to 16.8 percent, up from 16.7 percent, while the 15-year bond climbed to 17.8 percent from 17.7 percent in previous auctions. The 2-year bond yield held steady at 15.75 percent, maintaining its level for the third consecutive month.
These higher yields reflect the government’s effort to attract long-term investors amid inflationary pressures and tighter global financial conditions, especially as interest rates in developed markets remain high, attracting capital away from frontier economies like Uganda.
Meanwhile, growth in private sector credit was nearly flat in May, with the total stock of credit inching up by just 0.1 percent to Shs 23.54 trillion, from Shs 23.52 trillion in April. The marginal growth underscores lingering caution in the lending environment, as both banks and borrowers remain wary amid elevated interest rates and uneven post-pandemic recovery across sectors.
Of the total credit stock, Shs 16.86 trillion was denominated in Uganda Shillings, marking a slight uptick from Shs 16.76 trillion in April. However, credit denominated in foreign currency dropped to Shs 6.68 trillion, down from Shs 6.77 trillion, suggesting reduced demand for dollar loans, possibly due to improved local currency stability.
Uganda’s domestic borrowing remains a key pillar of government financing, especially in the wake of subdued external financing and mounting expenditure pressures. However, rising domestic yields could signal higher debt servicing costs and crowding out of private sector credit if not carefully managed.
Analysts note that while current oversubscription in debt auctions indicates market confidence, the government must be cautious not to over-rely on domestic markets at the expense of credit expansion for the productive sectors.
As Uganda heads deeper into the 2025/26 fiscal year, the effectiveness of fiscal consolidation, monetary policy coordination, and private sector credit stimulation will be critical in maintaining macroeconomic stability and driving sustainable economic recovery.
https://thecooperator.news/finance-ministry-releases-shs-17-1trn-for-first-quarter-of-fy-2025-2026/
Buy your copy of theCooperator magazine from one of our countrywide vending points or an e-copy on emag.thecooperator.news
