Bank of Uganda Governor Emmanuel Tumusiime Mutebile has confirmed that government is to borrow 1040 billion shillings from domestic market through issuance of treasury bills and treasury bonds.
He said that this is equivalent to an increase of 16% in the stock of government securities held by the market and currently amounting to 6.3 trillion shillings.
Mutebile ruled out the borrowing causing a problem in the market because the asset base of domestic financial system is growing at 20% per annum which means that demand for government securities from banks and NSSF is likely to grow at a similar pace hence the supply of securities issued through the primary auctions in the market will not outstrip the demand for them.
He further noted that the domestic financial system should be able to accommodate comfortably the increase in government borrowing without squeezing the available resources to fund private sector borrowing.
In the Financial Year 2013-2014 budget reading last Thursday, the Minister of Finance Maria Kiwanuka announced that the budget will be financed by issuing government securities on domestic markets and net government draw down from its savings of 708billion shillings.
The total resource inflows in the budget were projected to amount to 13.1trillion, domestic sources contributing 10.5trillion representing 81.1% of the total budget.
Still in the budget, Kiwanuka noted that Uganda Revenue Authority will collect taxes amounting to 8.4trillion and Non-tax revenues of 275billion shillings would be collected.
When asked how sure she is that Ugandans will fund the 81% of the budget, she said that she is depending on Ugandans to fund the portion of the budget through paying their taxes to Revenue.
The total external financing of the budget will total to 2.6trillion equivalent to 20% of the total budget.
Keith Muhakanizi, the Secretary to the Treasury, said that in the past government was borrowing from the monetary policy but beginning from the current financial year it started borrowing for mainly treasury operations.