KAMPALA, September 22, 2026 – The Bank of Uganda [BoU] Governor Michael Atingi-Ego has warned that higher-than-planned government borrowing could push up interest rates and undermine private-sector access to credit, even as he said the domestic financial market has sufficient capacity to absorb the Government’s planned borrowing.
Atingi-Ego appeared before Parliament’s Budget Committee, chaired by Gabriel Okumu, on Monday to give the central bank’s assessment of Uganda’s Charter of Fiscal Responsibility, a government policy document that sets out the principles, objectives and measurable targets for the management of public finances.
He said the Charter was “broadly credible” but cautioned that its projections depended on Government maintaining fiscal discipline, managing petroleum revenues prudently and keeping domestic borrowing within projected levels.
“The Charter overall is broadly credible, provided the fiscal consultation proceeds as planned, and domestic financing remains consistent with the market conditions, and the petroleum revenues are managed prudently,” Atingi-Ego said.
He said the Charter’s projected net domestic financing for the 2026/27 financial year stands at about Shs 12.7 trillion, equivalent to 4.6 percent of non-oil gross domestic product [GDP], down from the Shs15.1 trillion financed in the previous financial year.
Atingi-Ego said improved liquidity in the banking system, lower yields on government securities and continued investor appetite for Treasury securities indicate that the domestic market can accommodate the planned borrowing.
“The market has what it takes to absorb this proposed net domestic financing,” he said, adding that government could finance its requirements “without disrupting the private sector.”
However, he warned that the situation could change if government exceeds the borrowing level projected in the Charter.
“The risks are that government may be tempted to go for higher than projected domestic borrowing, and it could reverse the gains by placing upward pressure on the interest rates and therefore crowding out the private sector,” he said.
He said private-sector credit had grown by 16.1 percent year-on-year to June 2026, while average monthly growth during the year stood at about 11.5 percent. He projected average private-sector credit growth of about 13 percent in 2026/27.
Atingi-Ego also said the Charter’s assumptions on exchange rates and interest rates were broadly consistent with the Bank’s macroeconomic outlook, with interest rates expected to decline gradually if government continued with fiscal consolidation.
Petroleum revenues
On petroleum revenues, Atingi-Ego clarified that the Petroleum Revenue Investment Reserve would remain a government asset, although it would be operationally managed by the Bank of Uganda.
“These will be government assets. They will not be [on the] Bank of Uganda balance sheet,” he said.
He said petroleum revenues invested offshore would not directly increase liquidity in Uganda, with the impact on domestic liquidity arising mainly when funds are transferred to the Consolidated Fund and spent locally.
Atingi-Ego warned that major changes in government spending or taxation could put pressure on inflation and financial markets.
“If there are any deviations in the fiscal path that will compromise price stability, we will take all the appropriate actions to ensure that price stability is maintained,” he said, adding that this could include raising interest rates.
Parliament urged to scrutinise borrowing
Meanwhile, Committee Chair Okumu urged parliament’s Finance, Budget and National Economy committees to scrutinise government borrowing more closely.
“If we are not careful, especially the committees on Finance, Budget and National Economy, if we do not put our foot down, we are really going to let the country down,” Okumu said.
He said the committees should use the next five years to “scrutinise the borrowing and advise government appropriately.”
Richard Sebamala, the Bukoto Central MP sought assurance on how government would implement its expenditure programme while servicing debt, maintaining stable exchange rates and managing possible delays in oil revenues.
“The oil assumption can go on until around 2028, do you think government will adhere to these fiscal rules, and if not, what provisions should Parliament change?” he asked.
Atingi-Ego said the central bank was assured of the oil projections.
Marshall Alenyo, the Jonam County legislator, questioned whether the Charter should include a reporting requirement on domestic arrears, given the risk that expenditure controls could be circumvented through unpaid bills.
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