Banks Lead as Government's Top Creditors Amidst Shifting Investor Landscape

Commercial banks remain the largest holders of government debt, underscoring their crucial role in financing state operations. As of March 2026, banks held Shs23.181 trillion in government securities, representing 28.9 percent of the total outstanding stock, according to the Ministry of Finance.

Despite this dominance, the banking sector’s share saw a slight decrease from 29.9 percent in the previous quarter. The ministry attributes this continued preference for government securities to the banks’ strong liquidity and their inclination towards low-risk investments.

Meanwhile, other institutional investors are making significant inroads. Pension and provident funds solidified their position as the second-largest category, increasing their holdings to Shs13.455 trillion (16.8 percent). This growth highlights the expanding involvement of long-term investors, aligning with the government’s goal of fostering a stable investor base.

Insurance companies also boosted their investments, while collective investment schemes and other institutional players showed growing interest in the domestic debt market. The overall stock of government securities at face value grew by 13.8 percent to Shs80.28 trillion in the quarter ending March 2026.

Concurrently, the proportion of securities held by offshore investors dipped from 11.6 percent to 9.6 percent, largely due to increased domestic investor activity. The Bank of Uganda’s holdings also rose, primarily for monetary policy and market stabilization. The government’s debt management strategy is focused on developing the domestic market, extending debt maturities, and securing cost-effective financing.

Source: https://www.monitor.co.ug/uganda/business/finance/banks-remain-largest-source-of-govt-debt—5498472