Uganda Government raises Shs4.4 trillion from securities in May

The Government of Uganda raised a total of Shs4,429.4 billion through the sale of Treasury Bills and Bonds in May 2025, according to the latest Performance of the Economy Report released by the Ministry of Finance.

Of the total funds mobilized, Shs. 755.5 billion was raised from short-term Treasury Bills (T-Bills), while the bulk — Shs. 3,673.8 billion — came from long-term Treasury Bonds (T-Bonds).

This massive borrowing reflects the government’s continued reliance on domestic debt markets to meet its financial obligations amid growing expenditure demands.

The Ministry of Finance noted that out of the Shs. 4.4 trillion raised, Shs. 2,421.4 billion was used to refinance maturing domestic debt, while Shs. 2,008.0 billion went towards financing other items in the national budget, such as infrastructure, health, and education spending.

Refinancing—also referred to as debt rollover—is a common strategy used to manage debt sustainability by replacing maturing obligations with new borrowing, helping the government avoid payment defaults.

Rising Interest Rates Signal Higher Borrowing Costs

The report indicates that interest rates on government securities generally increased during the month, reflecting a higher domestic borrowing requirement by the government and increased competition for investor funds.

The 91-day and 364-day Treasury Bills saw yields rise to 12.1% and 15.4%, respectively, up from 9.5% and 15.1% in April. Meanwhile, the 182-day T-Bill yield dropped slightly for the fourth consecutive month to 12.7%, down from 12.8%.

All Treasury Bill auctions were oversubscribed, with an average bid-to-cover ratio of 1.5, indicating healthy investor demand, especially for short-term government debt.

Bonds Reopened, Longer-Term Yields Climb

In a bid to mobilize more funds, the government reopened 3-year, 10-year, and 20-year Treasury Bonds on the primary market. These are previously issued bonds reoffered to investors at new prices and yields.

Yields on these reopened bonds increased across the board:

• 3-year bond: from 16.2% to 16.5%
• 10-year bond: from 17.1% to 17.5%
• 20-year bond: from 17.5% to 17.9%

Similarly, in private placements, where bonds are sold directly to select investors outside public auctions, yields also rose:

• 3-year: 16.5%
• 5-year: 16.7%
• 10-year: 17.5%
• 15-year: 17.7%
• 20-year: 18.2%

These rates were all higher than those recorded in the previous month, confirming that the cost of domestic borrowing is on the rise, a trend that could have implications for Uganda’s future debt servicing obligations.

Uganda has significantly ramped up its domestic borrowing in recent years to fill budget gaps, especially in the wake of declining donor support and fluctuating external financing. While domestic debt markets offer a convenient option for quick financing, the rising interest rates point to increased costs of borrowing, which could potentially crowd out private sector credit and strain future budgets.

The upward movement in yields also suggests that investors are demanding higher returns, possibly due to inflation expectations or perceived fiscal risks.

With the new fiscal year approaching in July, all eyes will be on how the government balances its borrowing needs with the imperative of macroeconomic stability.