Bank of Uganda Governor Michael Atingi-Ego has warned that higher-than-planned government borrowing could push up interest rates and undermine private-sector access to credit.
He issued the warning while even as he said the domestic financial market has sufficient capacity to absorb the Government’s planned borrowing.
Atingi-Ego was appearing before the Budget Committee of Parliament, chaired by Gabriel Okumu, on Monday, 21 September 2026, to give the central bank’s assessment of Uganda’s Charter of Fiscal Responsibility, a government policy document setting out the principles, objectives and measurable targets that guide the management of public finances.
The Governor said the charter was “broadly credible” but cautioned that its projections depend on government maintaining fiscal discipline, managing petroleum revenues prudently and keeping domestic borrowing within projected levels.
“The charter overall is broadly credible, provided the fiscal consultation proceeds as planned, and domestic financing remains consistent with the market conditions, and the petroleum revenues are managed prudently,” Atingi-Ego said.
He said the charter’s projected net domestic financing for 2026/2027 stands at about Shs12.7 trillion, equivalent to 4.6 percent of non-oil GDP, lower than the Shs15.1 trillion financed in the previous financial year.
Atingi-Ego said improved liquidity in the banking system, lower yields on government securities and continued investor appetite for Treasury securities indicate that the domestic market can accommodate the planned borrowing.
“The market has what it takes to absorb this proposed net domestic financing,” he said, adding that government could finance its requirements “without disrupting the private sector.”
However, he warned that this could change if government exceeds the borrowing level projected in the charter.
“The risks are that government may be tempted to go for higher than projected domestic borrowing, and it could reverse the gains by placing upward pressure on the interest rates and therefore crowding out the private sector,” he said.
The Governor said private-sector credit had grown by 16.1 percent year-on-year to June 2026, while average monthly growth during the year was about 11.5 per cent. He projected average private-sector credit growth of about 13 per cent in 2026/2027.
Atingi-Ego also said the Charter’s assumptions on exchange rates and interest rates were broadly consistent with the Bank’s macroeconomic outlook, with interest rates expected to decline gradually if government continued with fiscal consolidation.
WN/as/APA