A Call for Agency Bonds in Uganda

The government has authorized loans that are increasing interest payment obligations. To reduce reliance on external borrowing, why not leverage local resources for revenue-generating infrastructure projects?

In 2023, the Bank of Uganda raised UGX 6 trillion in domestic debt, and with increased confidence in the bond market, 2024 was even greater collections. This momentum provides a perfect opportunity for the government to introduce agency bonds.

Agency bonds, whether obligation or revenue-based, could empower ministries and local governments (under strict guidelines) to independently finance infrastructure projects. For instance, roads like the Kiwatule-Kira Road could be financed locally, allowing Ugandans to earn interest on their investments rather than relying on foreign financing from China or Western states.

These bonds could take the form of zero-coupon or split bonds, enabling agencies to complete construction before projects generate revenue. While backed by the central government, repayment would be tied to the project’s success, not direct government budgets. Local governments could retain a capped percentage of revenues to service these debts, ensuring fiscal responsibility.

Benefits include reduced foreign exchange risk, decreased external debt interest, enhanced public trust, and increased local incomes. For example, a revenue bond by the Ministry of Works could repay Egis and CCC debts on the airport expansion or expressway projects, allowing locals to profit at favorable rates while reducing the government’s interest burden.

Introducing agency bonds would foster accountability, patriotism, and sustainable development through domestic participation in Uganda’s growth story.
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