Uganda’s Public Debt Hits Record UGX 130 Trillion as Domestic Borrowing Surge Raises Alarm

2026-03-16 - 12:18

KAMPALA – Uganda’s public debt has surged to a record US$34.86 billion (UGX 130.84 trillion) as of December 2025, piling fresh pressure on the government’s fiscal managers and raising concerns about the long-term burden on citizens and businesses. According to the Ministry of Finance, Planning and Economic Development’s latest Quarterly Debt Statistical Bulletin and Public Debt Portfolio Analysis, the debt stock jumped from US$34.21 billion (UGX 128.65 trillion) in September 2025 — a quarterly increase largely driven by aggressive domestic borrowing. The report shows domestic debt now dominates Uganda’s portfolio at 54.5%, equivalent to US$19.02 billion (UGX 68.86 trillion), while external debt stands at 45.3%, or US$15.84 billion (UGX 57.33 trillion). The ministry openly attributes the increase to “increased domestic debt issuances.” With Uganda’s population estimated at about 50 million people, the figures translate into roughly US$700 per citizen, a statistic that has ignited debate across social media platforms. “Can someone tell us what we now individually owe as citizens?” one user asked on X (formerly Twitter), while another warned bluntly: “This country is about to implode.” Debt Growth Years in the Making Uganda’s ballooning debt did not emerge overnight. Over the past decade, government borrowing has accelerated to finance large infrastructure projects including roads, energy investments and post-COVID economic recovery programmes. In recent years, Kampala has deliberately shifted toward domestic borrowing to reduce foreign exchange exposure tied to external loans. But economists warn the policy comes at a price. Treasury bills and government bonds carry double-digit interest rates, making domestic borrowing significantly more expensive and raising fears that government demand for credit is squeezing out private sector investment. IMF Sounds Caution The International Monetary Fund (IMF) in its January 2026 Post-Financing Assessment still classifies Uganda’s debt as sustainable with a moderate risk of distress. However, the Fund warned that the country’s debt-to-GDP ratio — estimated at about 52.4% in FY2024/25 — is steadily rising. More troubling is the growing cost of servicing the debt. Current projections show 20–25% of domestic revenues already going to debt servicing, with some estimates suggesting the figure could climb to 31% if borrowing continues at the current pace. At the same time, undisbursed loan commitments have reached US$3.74 billion, raising questions about whether borrowed funds are being deployed efficiently or simply sitting idle. Experts Warn of Private Sector Squeeze Development consultant Nyende Amman says the growing reliance on domestic debt must be handled carefully. “While domestic borrowing can help deepen local capital markets, the pace of debt accumulation requires careful management to avoid crowding out private sector credit and increasing debt servicing pressures,” Amman warned. Opposition politicians and independent economists have also raised concerns that heavy borrowing around election cycles — including the 2026 polls — risks tightening economic conditions further. Government Response The Ministry of Finance insists the situation remains under control and points to a number of policy steps already in motion. Under the Medium-Term Debt Management Strategy (MTDS) 2025/26–2028/29, government plans to restructure borrowing and reduce refinancing risks by shifting toward longer-term domestic bonds. Officials also say borrowing will be significantly reduced in the next financial year. Key measures include: Cutting domestic borrowing by 21% in FY2026/27 — from UGX 11.4 trillion to about UGX 9 trillion. Slashing external borrowing almost entirely in the coming fiscal cycle. Publishing regular debt bulletins and sustainability analyses to improve transparency. Rebalancing the debt portfolio away from short-term treasury bills toward longer-term instruments. Clearing domestic arrears, with UGX 1.4 trillion already allocated in the current budget. What Must Be Done Yet analysts say policy papers alone will not tame the debt trajectory. To keep Uganda’s debt from spiralling, economists recommend several urgent actions: Accelerate domestic revenue mobilisation by widening the tax base and reducing tax exemptions. Cut non-priority government spending, particularly supplementary budgets and wasteful expenditure. Strengthen public financial management reforms to ensure borrowed funds translate into productive projects. Enhance parliamentary and public oversight of loans and major infrastructure investments. Prioritise high-return projects that generate economic growth faster than debt accumulates. For now, Uganda’s debt remains technically sustainable. But the margin for error is shrinking. Every additional trillion borrowed today ultimately becomes a bill for tomorrow’s taxpayers — a reality that economists say government must confront sooner rather than later.