Businesses want the government to make Uganda Securities Exchange the primary market for Treasury bills and bonds, arguing that it would reduce the cost of borrowing.

Currently, government paper is controlled by six primary dealers: Bank of Baroda, Stanbic, Standard Chartered, Barclays, Centenary and DFCU bank. The buyers are an overwhelmingly few corporate institutions like the National Social Security Fund, banks and several foreign investors.

Economists and the business community said the move would help inject new life into the sluggish bourse, which is yet to see any new listings since 2011, when electricity distributor Umeme listed, and would also lower the cost of borrowing from commercial banks for the private sector by removing the government as a major competitor for debt.

Elias Kasozi the chairman of ALTX Ltd, a platform for buying and selling stocks said offering Treasury bills and bonds on the USE would ensure more people have access to them.

In the past two financial years, the government has been borrowing at interest rates ranging from 15 per cent to 23 per cent. Mr Kasozi said that on the USE, even those in the lower income bracket would benefit, as a platform like ALTX allow individuals with just Ush10,000 ($2.9) to buy securities.

Keith Kalyegira, the Capital Markets Authority chief executive officer, said keeping government securities in the hands of banks results in little if any public participation, as the primary dealers determine the price and sell mostly to each other.   

Gideon Badagawa, executive director of the Private Sector Foundation Uganda, said the government’s dependence on banks to finance the budget is the reason interest rates are high, even though it can access secondary financing from the USE.

“Banks prefer to lend to the government, as there are virtually no costs (and no risks). As a result, banks lend to the private sector at higher, unaffordable rates,” said Mr Badagawa.

Information from the Ministry of Finance, Planning and Economic Development shows that the amount of money borrowed from the domestic markets doubled from Ush5.1 trillion ($1.5 billion) in the 2011/12 financial year to Ush10.4 trillion ($3.0 billion) as at March, showing an increasing reliance on the domestic market for borrowing by both the government and private sector.

Data shows that private sector credit declined during the past financial year from 20.2 per cent at the end of the 2014/15 to 8.7 per cent of total domestic debt.

Matia Kasaija, the Minister of Finance, Planning and Economic Development, said the decline in private-sector credit constrained the economy’s growth rate of 4.6 per cent in the past financial year.

However, the government seems unwilling to list Treasury bills and bonds on the USE. Jim Mugunga spokesman of the Bank of Uganda said the Capital Markets Authority should focus on persuading the private sector to list on the USE.

“They have failed to get private-sector businesses to list on the USE, because there is a lack of awareness. That’s whom they should be focusing on,” he said.

Mr Mugunga said Uganda cannot compare itself to Kenya or South Africa because those markets generate more money as more people participate in trading.

USE has 16 listed companies; eight local and eight cross listings, mainly from Kenya.