Can Uganda pay its huge debts? Experts raise concerns over growing fiscal pressure

Uganda’s public debt has been a growing topic of discussion, and with good reason.

The recently released 2025/26 Budget Framework Paper reveals that the country’s debt stock is set to increase significantly, hitting Shs108.6 trillion in the next financial year.

This rise is attributed to ambitious borrowing for infrastructure projects, including oil roads, industrial parks and health facilities. But as the country builds for the future, it grapples with a critical question: is this borrowing sustainable, and at what cost to ordinary Ugandans?

At the heart of Uganda’s rising debt is the government’s drive to modernize infrastructure and boost economic growth. Investments are being funneled into critical projects such as hydropower plants, water infrastructure, and Entebbe and Kabalega international airports.

These projects are seen as game-changers, promising to unlock economic potential by improving transport, energy access and industrialization. For instance, oil roads are key to harnessing Uganda’s oil reserves, which the government hopes will transform the economy.

Yet, this borrowing comes at a steep cost. Uganda spends nearly one-third of its domestic revenue on debt servicing. In the 2023/24 financial year alone, debt servicing consumed Shs8.76 trillion, with this figure expected to rise to Shs12.72 trillion in the current financial year. While the government insists that Uganda’s debt remains sustainable in the medium and long term, the strain on public finances is evident.

THE HUMAN IMPACT OF DEBT-FINANCED GROWTH

For ordinary Ugandans, the impact of this borrowing is multifaceted. On the one hand, improved infrastructure promises long-term benefits.

Better roads mean easier access to markets for farmers, while expanded industrial parks could create jobs. Health infrastructure projects may improve access to medical services, and reliable energy from hydropower plants could spur business growth High debt servicing means less money is available for essential services such as education, health, and social protection.

When one-third of domestic revenue is allocated to repaying loans, it limits the government’s ability to invest in sectors that directly improve the quality of life for citizens.

THE CROWDING-OUT EFFECT ON THE PRIVATE SECTOR

Another concern is the government’s reliance on domestic borrowing, which has historically crowded out the private sector. When the government borrows heavily from local banks, it leaves less capital available for businesses to access loans. This stifles entrepreneurship and slows economic growth.

To address this, the government plans to reduce domestic borrowing in the 2025/26 financial year to Shs 4.011 trillion, down from Shs 8.968 trillion.

This reduction aligns with a strategy to prioritize concessional loans, which come with lower interest rates and longer repayment periods. While this is a step in the right direction, the challenge will be ensuring these funds are used efficiently to deliver tangible benefits.

The Sustainability Debate

The government argues that Uganda’s debt remains sustainable, pointing to robust economic growth and improved resource allocation. However, the numbers tell a more complex story. External debt repayments are projected to rise, and interest payments alone are set to consume 3.7% of GDP.

This growing burden raises questions about how much borrowing Uganda can afford without jeopardizing its financial stability. Additionally, global economic uncertainties, including fluctuating oil prices and rising interest rates, could exacerbate the debt burden. A sudden economic shock could strain Uganda’s ability to service its debt, with ripple effects on public services and economic stability.

Despite these challenges, there are reasons for cautious optimism. Strategic investments in infrastructure could position Uganda as a regional trade hub, especially with initiatives like the African Continental Free Trade Area (AfCFTA). Industrial parks and improved logistics could attract foreign investment, while oil revenues—if managed prudently— could provide a much-needed boost to public finances.

Moreover, the government’s focus on increasing domestic revenue mobilization is critical. By expanding the tax base and improving tax collection, Uganda can reduce its reliance on borrowing and free up resources for development.

A Balancing Act

Uganda’s rising debt reflects a nation striving for growth but grappling with trade-offs. The ambitious borrowing for infrastructure projects could unlock transformative economic opportunities, but only if managed with discipline and accountability. The challenge lies in balancing immediate debt servicing needs with long-term investments that benefit all Ugandans.

For citizens, the stakes are high. As Uganda charts its path forward, the government must ensure that the benefits of these investments are felt at the grassroots level. Whether it’s a farmer accessing markets more easily or a student attending a well-equipped school, the success of Uganda’s borrowing strategy will ultimately be judged by its impact on everyday lives.

REACTION TO UGANDA’S RISING DEBT

Uganda’s escalating debt has sparked reactions from key stakeholders, highlighting challenges in governance, fiscal discipline, and resource allocation.

Bob Kirenga, executive director of the National Coalition of Human Rights Defenders, attributes Uganda’s debt woes to corruption and mismanagement. He argues that without a clean and efficient system, borrowed funds will continue to be squandered, deepening the country’s financial woes.

“Corruption within the executive branch often redirects borrowed money into unproductive ventures, such as donations to favored individuals or groups,” Kirenga noted.

This diversion leaves funds idle while accumulating interest charges. Kirenga urged Uganda to adopt meritocracy in recruitment and decision-making, drawing lessons from countries like Singapore, where governance efficiency has driven development.

Julius Mukunda, executive director of the Civil Society Budget Advocacy Group (CSBAG), acknowledged progress in restructuring Uganda’s debt into long-term arrangements, reducing the pressure of short-term obligations.

“Debt refinancing has decreased from Shs 8 trillion to Shs 5 trillion, providing breathing room for immediate obligations. By the time these debts mature, we hope oil revenues will boost repayment capacity,” Mukunda explained.

However, he warned that government discretionary spending remains constrained. Out of the Shs 57 trillion budget, half is allocated to debt servicing, leaving limited resources for development initiatives. Mukunda also highlighted inefficiencies in utilizing borrowed funds, pointing out Shs 11 trillion in undisbursed loans incurring commitment fees. Busiro East MP Medard Lubega Sseggona described the country’s rising debt as a crisis, citing poor planning and misaligned priorities.

“A large portion of our budget goes to debt repayment, yet we continue borrowing without a clear strategy for growth and production,” Sseggona said. He emphasized the need to reduce public administration costs, which consume a significant share of national resources. Cutting these costs, he argued, would free up funds for debt servicing and economic growth.

CALLS FOR CHANGE

Human rights lawyer George Musisi framed Uganda’s debt problem as a failure of public finance management. He pointed to widespread corruption, mis-budgeting, and poor accountability as core issues.

“Ugandans are not seeing value for the debt incurred. Mismanagement and lack of transparency erode public confidence and ownership of the debt,” Musisi said.

He stressed that without addressing these systemic flaws, the cycle of borrowing without tangible development outcomes would persist.

The experts agree that addressing Uganda’s debt crisis requires more than just restructuring loans. It demands a shift in governance priorities, greater fiscal discipline, and stronger accountability measures. Without these changes, Uganda risks falling deeper into unsustainable debt, undermining its economic potential and burdening future generations.