The Government of Uganda auctioned treasury bills and bonds worth Shs1.087.90 trillion in July 2023, to finance the national budget and pay debt, a new report reveals.
According to the Performance of the Economy Monthly Report for July 2023 released by the Finance ministry on Monday, August 21, 2023, during the month of July 2023, three primary market auctions for securities were undertaken.
“From them, a total of Shs1.087.90 trillion (at cost) was raised. Of this, Shs561.62 billion was from Treasury Bills while Shs.526.28 billion was from Treasury Bonds,” the report reads in part.
“Of the amount raised, securities worth Shs335.29 billion were issued for the refinancing of maturing debt whilst Shs752.60 billion went towards financing other items in the Government budget,” it adds.
The government is currently implementing a Shs52.7 trillion budget. However, due to significant donor funding cuts, it is struggling to finance the budget, hence turning to the securities.
Treasury bills are risk-free short term financial instruments for investment regularly issued to the public by the government through the Bank of Uganda. The investment period for treasury bills is short term tenors of: 3 months (91days), 6 months (182 days) and 1 year (364 days).
Treasury bonds on the other hand are long term financial instruments also issued by the government through Bank of Uganda to the investing public. The Investment Period for Treasury Bonds is long term tenors of: 2 years, 3 years, 5 years, 10 years and 15 years
According to the report, there was a general decline in yields of treasury instruments during the month of July. Whereas the yield on the 91-day Treasury bill was unchanged at 9.8%, yields for the 182-day and 364-day tenors fell from 11.7% and 12.3% in June 2023 to 11% and 12%, respectively.
“The decline in yields for these instruments was largely due to increased demand for Government securities during the month. All auctions for Treasury Bills were oversubscribed, with the average bid to cover ratio being recorded at 3.09 in July 2023,” the report states.
During the month, the Government issued two T-bond instruments with tenors of 3 years and 20 years. The Yield to Maturity for the 3-year tenor decreased to 13.5% in July from the 14.0% recorded in June. Similarly, the Yield to Maturity for the 20-year tenor lowered to 15%, from 16.25% reported in the previous issuance.