By: MARTIN LUTHER OKETCH
Kampala: Ugandans have been urged to invest in government securities (treasury bills and bonds) because they are risk-free and offer higher returns on investment.
The Bank of Uganda issues both treasury bills and treasury bonds on behalf of government and makes payment on it in fixed interest rates without defaulting.
Currently, the volume of government securities in the primary market is about Shs7.5 trillion.
Speaking during the awarding giving ceremony for the 2013 best Primary Dealer in government securities on Tuesday, the Deputy Governor Bank of Uganda, Dr Louis Kasekende, said currently, the real return on investment in government securities is in the range of 9 to 14 per cent which is very high compared to return on investment in deposits which is in the range of 0 to 4 per cent.
“There is still room for people to invest in government securities for savings.
The level of saving in Uganda – both private and government is still low, constituting a ratio of 6 per cent for private sector and 12 for government to the Gross Domestic Product, which is very low,” he said.
Treasury bills, also referred to as short-term instruments (securities), are structured in three maturities, in the range of 91 days, 182 days, and 364 days.
These securities are issued at a discount and currently they account for more than half of total outstanding securities (government securities) that are yet to mature.
Treasury bonds, on the other hand, are long-term instruments which are structured in maturities periods of 3, 5 10 and 15 years.
In the past, treasury bonds were used for and used monetary policy purposes only.
However, due to budgetary constraints following aid suspension, government since last financial year, has been using these securities for fiscal policy purposes to finance budget deficits.
The Managing Director of Stanbic Uganda, Mr Philip Odera said people investing in government securities will lead to the development of Uganda’s financial market. “Too many investors are at risk but this is an investment which risk-free and is for all types of investors,” he added.