Uganda’s growing debt sparks fears of future financial strain

Uganda’s public debt has climbed to $34.86 billion, about Shs 131.2 trillion, by December 2025, up from $34.21 billion recorded in September the same year, according to figures from the Ministry of Finance.

The increase comes even as the country continues to repay its loans. Government spent about Shs 1.563 trillion on debt servicing in the same period. Debt servicing refers to paying back both the loan and the interest charged on it.

The country’s debt now stands at 52.7 per cent of its Gross Domestic Product (GDP), which is the total value of goods and services produced in the economy. This level is above the East African Community limit set to keep borrowing under control.

However, government officials insist the situation is still manageable. They argue that most of the borrowed money has been invested in infrastructure such as roads and energy projects, which are expected to grow the economy in future, especially with anticipated oil revenues.

Data from the Ministry shows that more than half of the debt, about 54.5 per cent, is borrowed locally from banks and investors within Uganda. The rest is borrowed from outside the country, mainly from institutions such as the World Bank, International Monetary Fund and African Development Fund. These lenders usually offer loans with lower interest rates and longer repayment periods.

Permanent Secretary and Secretary to the Treasury Ramathan Ggoobi said government is trying to rely more on these cheaper loans to reduce pressure on the budget.

Despite this reassurance, concern is growing among economists. Dr Fred Muhumuza warns that focusing only on the debt-to-GDP ratio can be misleading. He says Uganda is already spending more than 30 per cent of its domestic revenue on interest payments alone, which is far higher than the regional average.

Muhumuza cautions that this limits money available for essential services such as health and education. He warns that continued borrowing, especially at high local interest rates, could push the country into deeper financial trouble.

Julius Mukunda, executive director of the Civil Society Budget Advocacy Group, shares similar concerns. He says what matters most is how the borrowed money is used and whether it generates enough returns to justify the cost.

Experts agree that while Uganda’s debt may appear sustainable on paper, risks remain. These include rising domestic borrowing, delays in oil projects and external shocks such as climate events or changes in global markets.

The debate now centres on whether Uganda can manage its growing debt without placing a heavier burden on future generations.