Public Finance & Economic Development
Uganda Sells $96m in Treasury Bills at 2025 Auction
The Bank of Uganda is tapping short-term securities to bridge its budget deficit. With yields rising, Treasury Bills are drawing local banks, pension funds, and foreign investors. Economists warn, however, that heavy domestic borrowing could crowd out private sector credit.
The Bank of Uganda is auctioning Shs355bn ($96m) in Treasury Bills on Sept 24, 2025, to finance projects, attract investors, and strengthen the economy.
Kampala, Uganda — The Bank of Uganda (BoU) has launched a fresh auction of Shs355 billion ($96 million) in Treasury Bills, offering investors a safe and profitable option while helping finance the country’s development plans. The sale takes place on September 24, 2025, and comes as the government navigates tighter global financing conditions.
The central bank announced that the auction will feature three maturities. These include 91-day bills worth Shs25 billion ($6.8 million), 182-day bills at Shs75 billion ($20.3 million), and 364-day bills totaling Shs255 billion ($68.9 million). The securities are available to both domestic and foreign investors.
“The auction provides a stable investment avenue and supports the country’s broader economic agenda,” the Uganda Broadcasting Corporation reported, quoting BoU officials.
Why the Auction Matters
Uganda faces a budget deficit as spending outpaces revenue. For the fiscal year 2025/26, the government projects Shs31.9 trillion ($8.6 billion) in revenue against expenditures of Shs51.53 trillion ($13.9 billion). Treasury Bills, alongside longer-dated bonds, have become a key tool to bridge the financing gap. In June this year, the government raised $88 million in a rare private placement treasury bond auction.
The BoU has leaned on short-term paper to meet immediate cash needs while ensuring investor confidence. The approach also helps to manage liquidity and keep inflation under control.
According to Kikubo Lane, yields on government securities have recently climbed, reflecting both global pressures and local demand for higher returns.
Investor Appetite and Global Context
Ugandan government paper continues to attract significant interest. Demand has been supported by domestic pension funds, commercial banks, and insurance firms. Foreign portfolio investors have also increased their participation, seeking exposure to frontier African markets with strong growth potential.
Global conditions play a major role. The U.S. Federal Reserve has kept interest rates high, making global financing more expensive. Meanwhile, regional peers such as Kenya and Tanzania face fiscal challenges of their own. As a result, Uganda’s Treasury Bills offer relatively attractive yields for cautious investors.
The IMF has warned that frontier markets like Uganda must carefully manage debt sustainability. With external debt already estimated at $24.5 billion in mid-2025, the balance between borrowing and stability is delicate.
Debt Sustainability in Focus
Uganda’s domestic debt stock has risen as the government turns inward for financing. By issuing more Treasury Bills and bonds, it reduces reliance on costly external loans. This strategy lowers exposure to currency volatility and international credit risks.
However, it also raises the risk of “crowding out” private sector borrowing. Commercial banks often prefer risk-free government securities over lending to businesses. Economists warn that over time, this could dampen credit growth for small and medium-sized enterprises.
Still, the BoU insists that short-term securities remain vital for balancing fiscal needs with monetary stability. In an interview with SoftPower, analysts said the central bank’s discipline has helped maintain investor confidence despite global volatility.
Next Steps for Investors
Investors interested in today’s auction can participate through the Central Securities Depository System operated by BoU. Settlement is typically on a T+1 basis, meaning payment and allocation occur one day after the auction.
Successful bidders will earn interest based on the discount rate offered. The securities are backed by the government, making them among the safest investments available in the local market.
Market participants expect yields to remain elevated, given inflationary pressures and rising domestic borrowing needs. This may provide attractive returns for both institutional and retail investors.
Broader Economic Implications
The auction is more than just a fundraising exercise. It signals Uganda’s determination to sustain growth, manage inflation, and maintain macroeconomic stability.
According to Nile Post, investor interest in government securities has steadily grown in recent years. This has been aided by regulatory reforms and efforts to deepen Uganda’s capital markets.
For the government, the challenge remains balancing short-term borrowing with long-term debt sustainability. With infrastructure and social spending priorities expanding, Treasury Bills will continue to play a central role in bridging funding gaps.
Outlook
Uganda’s latest Treasury Bill auction underlines the delicate balance between funding needs and financial stability. As global markets remain volatile, BoU’s ability to attract investors at favorable rates will be closely watched.
Economists argue that consistent transparency and prudent fiscal management will be key. If managed well, these auctions could strengthen the country’s financial credibility and attract further international investment.
Public Finance & Economic Development
Kenya Flags Wider Budget Deficit in 2026/27
Kenya projects a 5.3% budget deficit in the 2026/27 fiscal year, citing increased infrastructure and social spending. The government plans to fill the gap through external and domestic borrowing.
Kenya projects a wider 2026/27 budget deficit at 5.3% of GDP, leaning more on external borrowing amid fiscal and debt pressures.
Kenya’s Budget Deficit to Widen to 5.3% of GDP in 2026/27
Nairobi, Kenya — Kenya’s Finance Ministry projects that the budget deficit will widen to 5.3% of GDP in the 2026/27 fiscal year. This is higher than earlier forecasts. Officials say slow revenue growth and sustained spending have caused the gap.
The ministry will rely on domestic borrowing to finance most of the deficit. “We aim to fund the deficit responsibly while protecting the domestic market,” a Treasury statement said.
Revenue Shortfalls and Spending Pressures
The draft 2026/27 Budget Policy Statement shows total revenue at KSh 3.487 trillion, or about 16.7% of GDP. Revenue has underperformed because of slow economic growth, lower tax compliance, and weaker commodity prices.
The government plans total spending of KSh 4.642 trillion. This includes development projects, county transfers, and debt service. The resulting deficit will reach KSh 1.106 trillion.
To fill the gap, the Treasury will borrow KSh 1.01 trillion domestically and KSh 99.5 billion externally.
Domestic Borrowing Strategy
Officials say focusing on domestic borrowing will reduce reliance on foreign lenders. They also want to manage refinancing risks. Analysts warn that increased domestic borrowing may raise interest rates and crowd out private lending. “We must monitor the impact on businesses and households,” said a Nairobi-based economist.
Fiscal Challenges
Kenya has faced repeated revenue shortfalls. Weak tax compliance, underperforming state-owned enterprises, and slower economic growth contributed to the gap. The government is introducing reforms to expand the tax base, improve collections, and prevent leakages. “Revenue reforms will secure fiscal sustainability,” Treasury officials said.
Debt service remains a major challenge. Kenya’s public debt now exceeds KSh 7 trillion, with domestic debt taking the largest share. Interest payments consume a large portion of revenue, limiting funding for development.
Economic Outlook
Officials expect the deficit may narrow if reforms succeed and economic growth strengthens. Growth in agriculture, manufacturing, and tourism could improve revenue collection.
However, uncertainties persist. Global market volatility, climate shocks, and fluctuating commodity prices could affect revenue. Analysts urge the government to balance fiscal discipline with growth-promoting investments. “We must invest in key sectors while maintaining fiscal stability,” said a policy expert.
Parliamentary Approval
The government must submit the final budget to Parliament before July 2026. Lawmakers are expected to examine domestic borrowing plans closely. They will focus on ensuring borrowing does not restrict private sector credit or raise inflation.
Conclusion
Kenya faces a critical fiscal year. The widening deficit highlights the need for disciplined spending and stronger revenue collection. Officials say careful implementation of reforms could stabilise finances while funding essential services and development projects.
Public Finance & Economic Development
Kenya Approves Infrastructure Sovereign Wealth Fund
Proceeds from state asset sales, including a stake in Safaricom, will help seed the new funds. Officials say this approach will crowd in private capital and support long-term growth.
Kenya creates an infrastructure sovereign wealth fund to finance projects, cut debt, and attract private investment.
NAIROBI, Dec 15 — Kenya’s cabinet approved the creation of an infrastructure fund and a sovereign wealth fund on Monday. The funds aim to finance development projects and reduce reliance on public borrowing.
President William Ruto first announced the plans in October. He said the funds will mobilise investment without pushing debt to unsustainable levels. (Reuters)
Funds aim to drive growth
The infrastructure fund will focus on transport, energy, and water. Meanwhile, the sovereign wealth fund will manage state assets to generate returns for long-term spending.
Officials expect the funds to attract pension funds, private equity, development finance institutions, and sovereign investors. Consequently, Kenya hopes to broaden its investment base.
Privatisation to seed financing
The government plans to sell part of its Safaricom stake to fund the infrastructure vehicle. This approach allows the government to ring-fence proceeds for infrastructure without adding debt.
Finance Cabinet Secretary Ephraim Mwangi Maina said, “We will crowd in private capital while maintaining fiscal discipline.”
Debt pressures drive reform
Kenya’s public debt exceeded 70% of GDP in recent years. High debt limits government spending and increases borrowing costs.
Economist James Shikwati said, “The success of these funds depends on clear governance and transparency.”
IMF talks continue
The cabinet’s decision comes as Kenya prepares for an IMF staff visit in January 2026. They will discuss a possible new lending programme focused on fiscal consolidation and reforms.
Monetary easing supports growth
The Central Bank of Kenya cut its benchmark rate several times in 2025. The moves aim to lower borrowing costs and stimulate private-sector investment. Consequently, officials hope to revive economic activity and support growth.
Infrastructure priorities under new model
Major projects, including the Naivasha–Kisumu Standard Gauge Railway and power transmission upgrades, will benefit. Energy expansion is supported by KETRACO public-private partnerships, aligning with Kenya’s broader investment strategy.
Governance and oversight
Economists and civil society groups urge strong governance to prevent mismanagement. They recommend transparency, independent audits, and clear reporting frameworks to attract investors.
Parliamentary next steps
The cabinet will submit draft legislation to parliament soon. Lawmakers will review mandates, governance structures, and reporting requirements.
Public Finance & Economic Development
IMF Kenya Programme Talks Resume in January
IMF Kenya programme talks resume as staff plan a January visit to Nairobi. Discussions focus on fiscal reforms, debt sustainability, and new funding.
IMF Kenya programme talks resume as staff visit Nairobi in January to discuss funding, fiscal reforms, and debt sustainability measures.
IMF Staff to Visit Kenya in January for Fresh Talks
Nairobi, Dec. 10, 2025 — The IMF Kenya programme will enter a new phase as International Monetary Fund staff prepare to visit Nairobi in January to discuss a potential support programme. This follows a recent meeting between President William Ruto and IMF Managing Director Kristalina Georgieva in Washington DC, aimed at reviving funding negotiations for the East African economy.
Central Bank of Kenya (CBK) officials have emphasized the urgency of a “funded programme” that would unlock fresh support while ensuring fiscal stability. In a statement, the CBK Governor said: “We continue discussions with the IMF on getting a new funded programme. We expect a staff visit in January to formalize negotiations.” (Reuters)
Background: Why Kenya Needs a New IMF Programme
Kenya’s previous $3.6 billion IMF facility expired in April 2025, leaving the country reliant on limited external financing.The upcoming IMF Kenya programme discussions aim to resolve critical issues, including fiscal reforms, revenue generation, and debt.The upcoming IMF Kenya programme discussions aim to resolve critical issues, including fiscal reforms, revenue generation, and debt sustainability.
Negotiations have previously stalled over the classification of securitised government debt. Kenya maintains that certain liabilities, held by special-purpose vehicles, are not sovereign obligations, but the IMF views them as government debt. This disagreement has repeatedly delayed agreement, complicating the path to new funding.
Analysts note that securing a renewed IMF programme is pivotal for Kenya as it grapples with high public debt, rising expenditure pressures, and global interest rate volatility.
January Mission: Key Objectives
The IMF staff mission, scheduled for mid-January, will review Kenya’s financial performance, tax revenue targets, and plans for expenditure reforms. Officials expect discussions to cover debt sustainability, fiscal discipline, and potential lending support to stabilize the economy.
“The IMF Kenya programme is critical for restoring investor confidence and easing foreign-exchange pressure,” said an economist familiar with the discussions. “It will determine whether Kenya can maintain macroeconomic stability in 2026.”
Government officials stress that a successful programme could unlock billions in funding while supporting public services and key infrastructure projects.
Challenges for Implementation
Past IMF agreements required Kenya to meet strict performance benchmarks, including revenue collection targets and expenditure controls. Failure to meet these targets contributed to the previous programme’s expiry in April 2025.
“Without agreement on fiscal reforms and debt classification, any new IMF Kenya programme may be delayed,” said a policy analyst in Nairobi.
The government is now working to reconcile internal fiscal policies with IMF conditions, aiming for a balanced approach that maintains economic sovereignty while meeting international requirements.
International Implications
The upcoming mission has drawn attention from investors and regional partners. Uganda, Tanzania, and Ethiopia are closely monitoring developments, as Kenya’s fiscal stability impacts East African trade corridors, currency flows, and regional projects.
The IMF’s engagement also signals continued international interest in supporting emerging economies amid global economic uncertainties. Analysts say the January visit could set the stage for similar negotiations in neighboring countries if Kenya achieves a successful agreement.
Outlook
The IMF Kenya programme talks scheduled for January will be a defining moment for the country’s economic policy. Success could enhance fiscal discipline, restore investor confidence, and improve access to international funding, while delays may intensify economic pressures and weaken regional economic stability.
“Kenya’s next steps will determine whether the IMF deal becomes a lifeline or another missed opportunity,” said a senior economist in Nairobi.
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