economy 21 September 2026 Parliament of Uganda
Bank of Uganda Sounds Alarm on Government's Over-Borrowing Risks
The Governor of the Bank of Uganda, Michael Atingi-Ego, has cautioned Parliament that excessive government borrowing could lead to higher interest rates, potentially hindering private sector access to crucial credit. While acknowledging the domestic financial market's capacity to handle current borrowing plans, he stressed the importance of fiscal discipline. Source: https://www.parliament.go.ug/news/4624/bou-warns-excess-government-borrowing-could-crowd-out-private-sector
Governor Michael Atingi-Ego of the Bank of Uganda (BoU) has issued a stern warning to the government regarding its borrowing habits. Speaking before the House Committee on the Budget, Atingi-Ego highlighted that exceeding planned borrowing levels could inadvertently increase interest rates and subsequently limit the private sector’s ability to secure loans.
Despite this concern, the Governor assured the committee that Uganda’s domestic financial market possesses adequate capacity to absorb the government’s currently projected borrowing for the 2026/2027 financial year, estimated at Shs12.7 trillion. He noted that this figure is lower than the Shs15.1 trillion financed in the preceding year.
Atingi-Ego indicated that indicators such as improved banking system liquidity, lower yields on government securities, and strong investor demand for Treasury bills suggest the market can comfortably accommodate these needs without adversely affecting private sector financing.
However, he emphasized the critical need for fiscal discipline. The risk, he explained, lies in the temptation for the government to borrow more than planned, which could reverse positive economic gains by pushing up interest rates and crowding out private enterprise.
While the Charter of Fiscal Responsibility was deemed “broadly credible,” Atingi-Ego stressed that its success hinges on prudent management of petroleum revenues and adherence to domestic borrowing limits. He also clarified that while the Petroleum Revenue Investment Reserve is managed by the BoU, the funds remain government assets.
The committee, chaired by Gabriel Okumu, expressed concerns about government spending, debt servicing, and potential delays in oil revenue, urging closer scrutiny of borrowing activities over the next five years. Concerns were also raised about the potential for circumventing expenditure controls through unpaid bills.