Financing Needs And Opportunities, And Government Of Uganda

Uganda is in a transitional period in terms of both financing needs and opportunities, and Government of Uganda (GoU) has already begun to expand the range of options it utilises: some semi-concessional external debt has been contracted since FY08/09, and Treasury Bills and Bonds have been issued explicitly for fiscal policy purposes since FY12/13. In addition to these new modalities, opportunities for borrowing externally on fully commercial terms – such as in the form of dollar-denominated ‘Eurobonds’ – have also begun to emerge. In this paper we look at Domestic borrowing: Treasury Bill and Bond issuance. With GoU having begun to issue Treasury securities for fiscal purposes, the authorities face a challenge in determining both what†¦show more content†¦This paper seeks to incorporate this recent evidence into a consideration of the specific issues faced by Uganda. It aims to address the key costs, risks, and broader macroeconomic implications – including the potential impact on private investment and overall economic activity – and what steps Uganda can take to maximise the benefits and minimise costs and risks as GoU decides how much to turn to DD financing. Domestic debt is an area of considerable and ongoing reform in Uganda. Until FY11/12, Treasury Bills and Bonds were issued ostensibly only for monetary policy purposes; but as of FY12/13, GoU began to conduct net securities issuance primarily for fiscal policy purposes – raising around Shs.650 billion (1.2 per cent of GDP) towards the financing of the fiscal deficit that year. As reported above, by the end of FY12/13 the total stock of outstanding Treasury securities stood at 11.1 per cent of GDP; this is below the sub-Saharan Africa (SSA) average of around 15 per cent of GDP. In FY13/14 GoU planned to raise Shs1,040 billion, or 1.6 per cent of GDP, through net Treasuries issuance; this was in line with net Treasury issuance over the past ten years, which has averaged 1.5 per cent of GDP per year. Costs, risks and broader considerations Interest costs Figure 1 : selected cost and risk