Kampala — Analysts have asked Bank of Uganda (BoU) to open up the government debt market to more players, so as to enhance trade in treasury bonds and bills.

Bonds are precious long term debt papers usually covering between two to ten years. They are issued by governments to commercial banks, companies and individuals, who lend money to them, to either control the amount of cash in circulation or fund development projects like; roads and power dams.

Calls to open up the Uganda bond market, which is largely utilised by commercial banks, were made by Mr Francis Odubekun, the East Africa advisor, government debt issuance and management, United States Treasury Department, and Mr Simon Rutega, the chief executive officer, Uganda Securities Exchange (USE).

Mr Rutega told journalists that freeing the market would increase participation of both non-financial institutions like stock brokerage firms.

These will in turn bring on board more investors to compete for the bonds with commercial banks that tend to tightly hold onto the securities.

"We want to bring retail investors in the market so that they have more opportunities to invest in liquid securities," he said on Friday last week.

Mr Rutega's advice, followed Mr Odubekun's suggestion about a similar move at the 7th USE Beri Forum held in Kampala last week.

Through the BoU, the government periodically borrows between Shs15 and Shs90 billion from the private sector, paying interest rates ranging from 10 to 14 per cent as a return on the credit.

The high rates lure commercial banks to lend more to the government, which is considered a very credit worthy borrower while keeping away vast loans from companies and individuals who are considered to be erratic borrowers. "Its easy money for banks," Mr Rutega said, adding that because they buy and hold the securities they become 'untradeable', unlike in other foreign markets."

"BoU should insist that a certain percentage of the bonds should be traded and another should be held until maturity," he said.

The expert also expressed that the government bonds are primarily used to reduce the amount of money in circulation to tame inflation, instead of acting as an investment opportunity for many investors in the market .