Govt turns to domestic financiers to close gaps created by reduced external borrowing

The annual debt statistical bulletin and public debt portfolio analysis by the Ministry of Finance indicates that the stock of domestic debt rose from Shs34.5 trillion in June 2023 to Shs40.6 trillion in June 2024, representing a growth of 5 percent.
The increase represents a rise of domestic public debt to 18 percent from 13 percent due to a shift in government resource mobilisation strategy.
Data indicated that government debt mobilized through treasury bills rose from Shs4.9 trillion to Shs6 trillion, while that of bonds rose from Shs29.6 trillion to Shs34.6 trillion.
Government issues treasury bills and bonds to mobilise to finance budget deficits.
During the period, data shows, issuance of domestic debt in the 2023/24 financial year rose to Shs15.2 trillion, which was 34 percent higher than the Shs11.3 trillion issued in the 2022/23 financial year, of which Shs7.4 trillion was raised from treasury bills, while Shs7.8 trillion was raised from bonds.
However, during the period, the yield curve in the 2023/24 financial year shifted downwards due to a reduction in the Central Bank Rate in July 2023 from 10 percent to 9.5 percent. Banks continued to hold the largest stock of government debt of about 40 percent, followed by pension and provident funds at about 30 percent.
Data also indicated that the share of domestic debt service increased by Shs3.8 trillion from Shs12 trillion to Shs15.885 trillion, with all aspects of debt service increasing due to a persistent rise in net domestic financing target over the years.
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