Business 19 March 2026 Daily Monitor (Uganda)
Offshore Investors Exit Rattles Uganda's Bond Market Amid Global Tensions
Geopolitical shocks from US-Israel strikes on Iran have prompted offshore investors to pull back from Ugandan government securities, weakening the shilling to around Shs3,766 per dollar and driving up bond yields. The Bank of Uganda is countering the pressure through liquidity measures, despite solid local fundamentals like 2.9% inflation. Source: https://www.monitor.co.ug/uganda/business/finance/offshore-investors-rattle-bond-market--5396710
Global market jitters triggered by recent US-Israel strikes on Iran have hit Uganda hard, exposing its heavy dependence on foreign capital. Offshore investors, previously keen on government bonds, are now selling off holdings to shift into dollars, intensifying pressure on the Ugandan shilling.
The local currency has slid to about Shs3,766 per dollar, with trading levels reaching Shs3,881 buying and Shs3,891 selling on Friday. This retreat follows a period of confidence post-elections, where foreign inflows had lowered yields across the bond curve, including the new 25-year bond issued last year.
Bond yields, which had been falling earlier in 2026, are now climbing back up due to reduced demand. Long-term securities that rallied recently have reversed course as investors seek safety amid rising energy prices and inflation worries worldwide.
The Bank of Uganda has responded aggressively, mopping up Shs1.07 trillion through repos and Treasury bill auctions to stabilize liquidity. Foreign holdings in government debt once neared $3 billion—half of forex reserves—highlighting the risks of such reliance.
Experts like Grace Semakula of SBG Securities warn of inflation risks rising 1-4%, disrupting hopes for rate cuts. Still, upcoming oil exports could ease fiscal strains long-term, per Standard Bank Group’s Christopher Legilisho.
Uganda’s debt market matured in 2025 with longer maturities and growing retail participation, but sudden capital outflows underscore frontier market vulnerabilities.
Source: Daily Monitor (Uganda)