Govt to borrow sh990b through treasury bonds

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The Bank of Uganda (BOU) has announced a new government bond auction aimed at raising 990 billion shillings from investors across the country.

The auction is scheduled for Wednesday, February 18, 2026, and will feature three types of bonds with different maturities — three years, 10 years, and 20 years.

Under the plan, the Government intends to raise 230 billion shillings through the three-year bond, 330 billion shillings through the 10-year bond, and 430 billion shillings through the 20-year bond.

In a statement on Friday, the Bank of Uganda said the auction is part of its routine domestic borrowing programme, designed both to finance government activities and offer safe investment opportunities for Ugandans.

“These securities provide a safe investment option for Ugandans while supporting government funding needs,” the statement said.

Investors in the three-year bond will pay a 20% tax on interest earned, while those in the 10-year or 20-year bonds will pay 10%, a policy intended to encourage long-term investment.

"Both large and small investors can participate, " said the bank. 

Larger investors, mainly commercial banks, submit competitive bids, while individuals and smaller investors can invest with as little as 100,000 shillings, subject to a set maximum.

All applications must be submitted through the Central Securities Depository by 10:00 am on auction day.

Market context

The bond auction comes as the BoU recently kept its key lending rate unchanged at 9.7 per cent, noting that inflation remains low. 

Over the past year, inflation has averaged about 3.5%, below the government’s long-term target of 5%.

Officials say re-opening existing bonds rather than issuing new ones makes trading easier and improves market accessibility.

“This helps improve trading in the market and makes government securities more accessible to investors,” the bank said.

Uganda’s economy is expected to grow steadily, supported by infrastructure development and preparations for oil production, which is set to begin in late 2026.

However, the International Monetary Fund (IMF) notes that the country’s public debt has risen to about 52% of GDP, making local borrowing through bonds a key source of funding for the Government without over-reliance on foreign loans.

Return on investment

For ordinary Ugandans, government bonds can offer higher returns than many savings accounts, especially when inflation is low. 

For instance, someone investing 10 million shillings in the 10-year bond would earn about 1.6 million shillings annually before tax, or roughly 1.46 million shillings after tax, paid twice a year.

The BoU encouraged investors to study the offer carefully and participate through licensed financial institutions.

What is a government bond?

A government bond is a loan that individuals or institutions give to the government. In return, the government pays regular interest and returns the original investment at the bond’s maturity.

For example, a 1 million shillings five-year bond at 10% interest would earn 100,000 shillings per year, with the principal repaid (invested sum) at the end of the term. 

Governments use bonds to fund development projects such as roads, schools, hospitals, and other infrastructure. 

In Uganda, the Bank of Uganda issues bonds on behalf of the government.

Bonds are generally considered low-risk investments and provide predictable income, with key aspects including the interest rate, maturity period, and face value of the bond.