We Built a Whole Website So You Can Stop Fighting on Twitter

Part 1 of 3: Government borrowing, explained for normal people

Ugandan twitter has been busy for the last few weeks with a discussion, or argument, about whether investing in bonds is better than building houses, growing pineapples, or even buying cars. It has gotten to a point that we cannot see other things on our timelines so we thought why dont we put the information in one place so that people can discuss there from an informed point of view. This blog post explains what government borrowing in form of bills and bonds is. It is the first of a series in which we will try to explain these things so that people can do other things on twitter.

Governments all over the world are in constant need of money. They have to build roads, pay teachers and all manner of other things governments do. Sometimes they do not have the money readily available but they know it will come in the future when you finally get round to paying your taxes. So to cover during that time, governments borrow from the local market. Not from the World Bank. Not from China. From normal people like you and me who chose to lend their money to the Government in exchange for interest.

This is what Treasury Bills and Bonds are. You give the government your money and they pay you back, with interest, on a date you agree on in advance. It is just like lending your friend to cover his tab at the bar only that this friend, the Government of Uganda, has never refused to repay someone or claimed their employer 'has delayed this month, I don't know why.' All the other words and terms you may hear after this is just english.

Who started it

Our government is not the only one which does this. Governments have done this since 1172. In that year some Government guys in Venice realised they could borrow money from the citizens and pay them back slowly. After all, government was not going anywhere. Those loans were called prestiti and became the first government bonds. Of course when other governments realised there was a new source of easy money they all copied and thats how you have found yourself on this page. The Bank of Uganda(BoU) borrows on behalf of the government. It does this by holding auctions (english has started). So far it has not been a bad borrower, in fact it has been an excellent one. If you have ever lent anyone money, you know how rare it is that they pay before midday on the agreed day without waiting for you to call. That is what BoU does, it pays your money back into whatever account you wrote down with interest without waiting for reminders. People have so much trust in it that so far, they have given them over UGX 40 trillion. Yet most Ugandans have never heard of it.

Now what

This series will try to explain what Treasury Bills and Bonds are, how they work, and why they matter — whether you have UGX 100,000 or UGX 100 million. We will start in the next post with Treasury Bills. If you want to go deeper into the numbers — especially the bonds vs. real estate debate — Alex Kakande's Substack is the most detailed analysis we've found on Uganda's fixed income market.

Next in the series: Treasury Bills, How they work, and why you should care.