Source: APO – Report:
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, 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 per cent 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.
On petroleum revenues, he clarified that the Petroleum Revenue Investment Reserve would remain a government asset, although operationally managed by Bank of Uganda.
“These will be government assets. They will not be Bank of Uganda balance sheet,” he said.
He said petroleum revenues invested offshore would not directly increase liquidity in Uganda, with the effect on domestic liquidity arising mainly when funds are transferred to the Consolidated Fund and spent locally.
Atingi-Ego warned that major changes in government spending or taxation could put pressure on inflation and financial markets.
“If there are any deviations in the fiscal path that will compromise price stability, we will take all the appropriate actions to ensure that price stability is maintained,” he said, adding that this could include raising interest rates.
Meanwhile, committee chair Okumu urged Parliament’s Finance, Budget and National Economy committees to scrutinise government borrowing more closely.
“If we are not careful, especially the committees on Finance, Budget and National Economy, if we do not put our foot down, we are really going to let the country down,” Okumu said.
He said the committees should use the next five years to “scrutinise the borrowing and advise government appropriately.”
Hon. Richard Sebamala (DP, Bukoto County Central) sought assurance on how Government would implement its expenditure programme while servicing debt, maintaining stable exchange rates and managing possible delays in oil revenues.
“The oil assumption can go on until around 2028, do you think Government will adhere to these fiscal rules, and if not what provisions should Parliament change?” he asked.
Atingi-Ego said the Central Bank was assured of the oil projections.
Hon. Marshall Alenyo (Ind., Jonam County) questioned whether the Charter should include a reporting requirement on domestic arrears, given the risk that expenditure controls could be circumvented through unpaid bills.
– on behalf of Parliament of the Republic of Uganda.
