Uganda’s domestic debt market remained active and resilient in June 2025, with the government raising UGX 1.86 trillion through three auctions of Treasury Bills and Bonds, according to the June 2025 Performance of the Economy Report released by the Ministry of Finance, Planning, and Economic Development. Of the total amount mobilized, UGX 393.09 billion was used to refinance maturing debt, while a larger portion UGX1.47 trillion was channelled toward funding the national budget. This underscores the government’s continued reliance on domestic borrowing to plug fiscal gaps in the face of subdued external financing and rising expenditure pressures. Despite fluctuations in interest rates, demand for government securities remained strong. All Treasury Bill auctions were oversubscribed, with an average bid-to-cover ratio of 1.55, an important indicator of robust investor appetite and confidence in government paper. The June auctions saw mixed movements in yields. Interest rates for the 364-day and 182-day Treasury Bills rose to 15.6% and 12.8% respectively, from 15.4% and 12.7% in May. Analysts attribute this increase to rising investor risk perceptions, tighter liquidity conditions in the domestic market, or adjustments in investor preferences for longer-dated instruments. On the other hand, the 91-day Bill yield slightly declined to 12.0%, down from 12.1% in May, likely reflecting short-term market optimism or heightened demand for shorter-tenor securities. Longer-term Treasury Bond auctions also recorded upward yield adjustments. The 5-year bond increased to 16.8% from 16.7%, while the 15-year bond climbed to 17.8% from 17.7%. The 2-year bond yield remained unchanged at 15.75%, maintaining its level for the third consecutive month. Finance Minister Matia Kasaija, while commenting on the domestic debt market performance, emphasized that government borrowing remains an essential tool for financing national priorities. “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 noted. Economic analysts, however, caution that rising domestic yields may increase Uganda’s debt servicing burden while potentially crowding out private sector borrowing. “While oversubscription in debt auctions reflects market confidence, excessive reliance on domestic borrowing could limit credit availability for the productive sectors that are vital for economic growth,†said an analyst. Uganda’s borrowing strategy has been largely shaped by the need to meet immediate fiscal needs, such as infrastructure development, debt repayments, and funding social programs. Yet, experts stress the importance of striking a balance between mobilizing domestic resources and supporting private sector-led growth. As Uganda transitions into the 2025/26 fiscal year, fiscal consolidation and coordination with monetary policy will be critical in managing inflationary pressures and maintaining macroeconomic stability. Additionally, stimulating private sector credit expansion is seen as a key driver for sustained economic recovery. The Performance of the Economy Report also highlighted the need for continuous reforms to make the domestic debt market more efficient and inclusive. Measures such as broadening the investor base, deepening secondary market activities, and enhancing transparency in debt issuance are expected to improve market performance. “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 noted
s. “Therefore, prudent management of these resources and ensuring their effective use in growth-enhancing projects is more critical than ever.â€
