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 this amount, Shs755.5 billion was mobilized from short-term Treasury Bills (T-Bills), while a much larger portion—Shs3,673.8 billion—came from long-term Treasury Bonds (T-Bonds). This significant level of borrowing highlights the government’s increasing dependence on domestic debt markets to fund its growing expenditure needs.
According to the Ministry of Finance, Shs2,421.4 billion of the raised funds were used to refinance maturing domestic debt, while Shs2,008.0 billion was allocated to financing other components of the national budget, including infrastructure, health, and education. This approach of refinancing, also known as debt rollover, allows the government to manage debt obligations sustainably by replacing maturing debt with fresh borrowing, thus avoiding payment defaults.
The report further noted that interest rates on government securities rose during the month, a trend attributed to heightened domestic borrowing requirements and increased competition for investor funds. Yields on the 91-day and 364-day Treasury Bills climbed to 12.1% and 15.4%, respectively, up from 9.5% and 15.1% in April. In contrast, the 182-day T-Bill yield fell slightly for the fourth consecutive month, dropping from 12.8% to 12.7%. All Treasury Bill auctions were oversubscribed, with an average bid-to-cover ratio of 1.5, indicating strong investor appetite, particularly for short-term government securities.
To raise additional funds, the government reopened previously issued 3-year, 10-year, and 20-year Treasury Bonds on the primary market. Yields on these reopened bonds increased to 16.5% (3-year), 17.5% (10-year), and 17.9% (20-year), up from 16.2%, 17.1%, and 17.5% respectively.
Yields also rose in private placements, where bonds are sold directly to selected investors outside public auctions. These stood at 16.5% for 3-year, 16.7% for 5-year, 17.5% for 10-year, 17.7% for 15-year, and 18.2% for 20-year tenors. All these rates were higher than those recorded in the previous month, reinforcing the upward trend in domestic borrowing costs.
Uganda has increasingly turned to domestic debt to plug fiscal gaps, especially amid declining donor support and inconsistent external financing. While the domestic market offers a faster route to financing, rising yields suggest increased borrowing costs. This could potentially limit credit availability for the private sector and exert pressure on future government budgets.
The upward shift in interest rates also reflects investor sentiment, possibly influenced by inflation expectations or concerns about fiscal risk. As the new fiscal year begins in July, the government’s challenge will be balancing its borrowing needs against the backdrop of macroeconomic stability.
