Who holds the largest share of govt's domestic debt

Commercial banks hold the largest share of government’s domestic debt, according to the Debt Statistical Bulletin and Public Debt Portfolio Analysis by the Ministry of Finance.
The analysis, which seeks to provide accurate and timely debt statistics, crucial for assessing the country’s public debt, indicates that during the year ended June, domestic debt, contracted through securities - bonds and treasury bills - stood at Shs40.5 trillion ($11b), of which 35.5 percent was held by commercial banks.
The 35.5 percent, data indicates, represents Shs14.4 trillion, an increase from Shs13 trillion in the year ended June 2023.
The rising share of government’s borrowing continues to present challenges to the private sector, which has been crowded out of the credit market, given that majority of financial institutions are choosing to lend to government, which is considered a low credit risk. 
However, government has previously indicated that it only borrows the excess money, noting that its borrowing also helps to sustain the banking sector.
In June, Secretary to the Treasury Ramathan Ggoobi, said government would continue to borrow domestically to keep banks in operation, noting that during this financial year government will borrow Shs9 trillion domestically to finance the budget.
“These banks have about Shs27 trillion. They are sitting on a mountain of money. I don’t know why they don’t lend to the public at 12 percent. If we don’t enter that market, most of them would be in trouble, our financial sector too. So, we borrow from a balanced point of view. We are mindful of the crowd-out effect. We only take the excess,” he said, after a section of participants during the 2024 NTV-Absa post-budget dialogue, had challenged government to consider a reduction in domestic borrowing. 
Private sector credit has remained subdued in the last two years due to high interest rates, worsened by a sustained increase in domestic borrowing by government.
Ministry of Finance data further indicates that in terms of the composition of the domestic debt share, banks are followed by pension and provident funds, whose share stood at 30.2 percent in June, with the value rising from Shs11.2 trillion in the year ended June 2023 to Shs12.2 trillion.
Offshore investors, whose decisions are largely determined by the movement of yields, follow with a percentage share of 7.6 percent and an investment portfolio of Shs3 trillion, which was an increase from Shs2.8 trillion held in the year ended June 2023.
Offshore investors had due to Covid-19 and related challenges, fled the local market in search of better yields but have been returning in the last two years due to growth in local interest rates in the bond and treasury bills market.
Investments by offshore investors in government debt remain important in the stability of the shilling, which had earlier this year, faced a lot of headwinds.
Offshore investors are followed by Bank of Uganda, with a value holding of Shs1.4 trillion, which was an increase from Shs1 trillion in the year ended June 2023, representing a percentage share of 3.6 percent.
Insurance firms and other financial institutions hold a share of 2.2 percent and 9 percent, respectively, representing a value holding of Shs879.8b, an increase from Shs800b and Shs3.6 trillion from Shs2.1 trillion, respectively.
Retail investors hold a share of 5.6 percent, valued at Shs2.2 trillion, while other categories hold 6.4 percent, valued at Shs2.5 trillion. 
Lender                                      ShareValue Commercial Banks 35.5 percentShs14.4 trillionPension and provident funds30.2 percentShs12.2 trillionOffshore investors 7.6 percentShs3 trillionInsurance firms2.2 percentShs879.8bOther financial institutions9 percent  Shs3.6 trillionRetail investors5.6 percentShs2.2 trillionOther Categories6.4 percentShs2.5 trillion
Uganda’s securities offer one of the best returns in East Africa
Uganda’s treasury market has the second highest yield (interest rate) in East Africa, making the country an attractive investment market for local and offshore investors. 
According to computed data from the National Social Security Fund (NSSF), Kenya has the highest yield across the region. 
Yields from bonds and treasury bills are a key factor in determining the decision of investors, especially in smaller markets such as Uganda. 
Speaking about their investment in the domestic and regional debt market, the NSSF managing director, Mr Patrick Ayota said long-term yield on bonds in the three major East African economies have risen compared to the previous year, noting that the growth remains crucial for NSSF’s growth by providing competitive returns for the Fund’s members. 
Data by NSSF shows that in Kenya, during the 12 months ended June, interest rates for the 10-year bond increased from 14.73 percent to 17.30 percent, while that of the 15-year bond rose from 14.76 percent to 16.77 percent.  NSSF further noted that the yield on the 20-year bond rose from 14.61 to 17.75 percent. 
Kenya was closely followed by Uganda, where in the same period, interest on the 10-year bond increased from 14.78 percent to 16.02 percent, while the yield on the 15 and 20-year bonds rose from 15.29 percent to 16.12 percent and 15.33 percent to 16.73 percent, respectively. 
NSSF’s total investment in Uganda’s domestic debt market stood at Shs11.1 trillion, with more investments in both the Kenyan and Tanzanian debt markets. 
NSSF data further indicates that during the 12 months to June, in Tanzania yield on the 10-year-bond rose from 10.34 percent to 12.3 percent, while that of the 15 and 20-year bonds increased from 11.27 percent to 15.16 percent, and from 12.01 percent to 15.24 percent, respectively.  
The increase in yield across the region, NSSF said, boosted its income from the fixed income segment, which increased from Shs2 trillion to Shs2.34 trillion. 
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