Uganda Government Rakes in Shs1.8 trillion from sale of securities in March

The Ugandan government raised a total of Shs1.85 trillion from the sale of Treasury Bills and Bonds in March 2025, underlining the continued reliance on domestic borrowing to finance the national budget, according to the latest Performance of the Economy Report released by the Ministry of Finance, Planning and Economic Development.

Of the total funds mobilized, Shs 715.80 billion was generated from Treasury Bills (T-Bills), while a larger share—Shs 1,131.61 billion—was raised through Treasury Bonds (T-Bonds). The report notes that Shs 1,360.18 billion was channeled towards financing budgetary activities, while Shs 487.23 billion was allocated to refinancing maturing debt obligations.

This significant performance in the domestic debt market comes at a time when the government is under increasing pressure to meet expenditure demands without overly expanding the fiscal deficit. Analysts say the buoyant investor appetite for government securities indicates strong private sector confidence and a relatively stable macroeconomic environment.

Interest Rates Shift Amid Policy Easing

The report further highlights shifts in interest rates for various short-term instruments. Yields on the 182-day and 364-day T-Bills dropped to 13.17% and 14.75%, respectively, down from 13.95% and 15.00% in February. The decline is attributed in part to the lagged effects of the Bank of Uganda’s accommodative monetary policy and increased participation by the private sector.

However, the 91-day Treasury Bill bucked the trend, with its yield rising from 10.69% in February to 11.33% in March. This upward movement may reflect short-term liquidity preferences or market anticipation of future rate adjustments.

All auctions for Treasury Bills during the month were oversubscribed, signaling robust investor demand. The average bid-to-cover ratio stood at 2.9—meaning that for every one shilling the government sought to borrow, there were nearly three shillings offered.

Bond Market Sees Mild Cooling in Yields

In the bond segment, government re-opened the 3-year, 10-year, and 20-year tenors. Yields on the 3-year and 20-year bonds decreased slightly to 16.20% and 17.50%, down from 16.55% and 17.89% recorded during the previous issuances in January. The 10-year bond yield remained flat at 17.10%.

This movement, experts say, could be indicative of declining inflation expectations and increased investor confidence in long-term government instruments, especially in a monetary environment that has seen reduced policy rates aimed at stimulating economic activity.

Broader Fiscal Context

The performance of the domestic debt market in March reflects broader fiscal dynamics, as government continues to juggle debt servicing obligations, infrastructure financing, and recurrent expenditures against a backdrop of sluggish revenue growth. With external financing options constrained by global credit tightening and geopolitical risks, domestic borrowing remains a critical pillar of Uganda’s fiscal strategy.

However, economists have cautioned that the increasing reliance on domestic borrowing could crowd out private sector credit and increase the cost of capital for businesses, if not carefully managed. Still, the oversubscription of government securities in March is a positive signal that domestic financial institutions remain liquid and eager to invest in safe assets.

The Ministry’s next report will be closely watched for signs of whether the current borrowing trend is sustainable and what it means for Uganda’s long-term debt trajectory.