Government figures show that Uganda’s public debt stock has nearly tripled between 2018 and 2025, with the debt burden per citizen rising from Shs1 million to approximately Shs2.5 million over the same period.
According to statistics from the Ministry of Finance and a 2024 audit report by the Office of the Auditor General, total public debt surged from Shs41 trillion in June 2018 to Shs116 trillion by June 2025.
This steep increase, driven in part by a growing reliance on domestic borrowing, is raising concerns among economists, who warn it could stifle local businesses and strain essential services such as healthcare and education.
While the Ministry of Finance maintains that the country’s debt remains sustainable, public finance experts argue that the mounting debt burden is exposing weaknesses in Uganda’s fiscal framework and limiting the government’s ability to meet critical needs.
Dr Fred Muhumuza, the director of the Makerere University Business School Economic Forum and Trustee of the African Forum and Network on Debt and Development (AFRODAD), underscores the gravity of the situation.
‘Almost 50 percent of the budget is for debt management (not even service),’ Dr Muhumuza observes.
‘This implies reduced degrees of freedom for the government to address emerging critical needs such as the provision of social services (education and health) and basic infrastructure such as roads and energy.’
Flaws in the frameworks
Ms Hilda Tumuhe, a public finance expert at SEATINI-Uganda, echoes these concerns. She says Uganda’s economic realities reveal flaws in the frameworks used to assess debt sustainability.
‘When it comes to aspects such as debt sustainability frameworks that are provided to us by the IMF, that is why you find that while our debt as Uganda could be sustainable according to the debt sustainability framework, we still see our government struggling to pay back the debt and also meet the day to day expenses and priorities of the citizens,’ she observes.
‘This means that either the framework has some loopholes. Let us see the case of the Covid-19 scenario and climate disasters that happen; some of these factors are not included in some of these frameworks,’ she adds.
Mr Ramathan Ggoobi, the Permanent Secretary at the Ministry of Finance, notes: ‘The Debt-to-GDP ratio of 51.3 percent remains within regional convergence thresholds, but underscores the need for prudent fiscal management.’
However, Dr Muhumuza cautions against relying solely on the Debt-to-GDP ratio to justify further borrowing, citing Japan as a contrasting example.
‘Japan has the highest Debt-to-GDP ratio, but Japan lends its money to the US and picks up enough money from there to settle all its debt obligations. It doesn’t even touch its economy,’ he explains.
‘Japan is the biggest buyer of American bonds, close to a trillion. But their debt structure: very low interest rates, but also Japan has a declining population. So that’s a different context,’ he continues. Dr Muhumuza also expresses concern over the government’s growing appetite for domestic borrowing.
‘Domestic borrowing increased by 57 percent in the last two financial years, with almost 50 percent as Debt Restructuring,’ he says.
‘Excessive domestic borrowing at high rates is not only crowding out the private sector but the public sector as well.’
Audit flags rising debt distress
A 2024 special audit by the Office of the Auditor General reveals that Uganda is currently facing moderate debt distress, largely due to increased domestic borrowing. The debt sustainability framework categorises risk levels as low, moderate, or high.
‘Uganda’s overall risk of debt distress has shifted from low to a moderate level, and Fitch, a credit rating agency, has revised Uganda’s credit rating from B+ Stable to a negative outlook,’ Auditor General Edward Akol states in the report.
He adds: ‘Public debt may be sustainable in the medium term as evidenced by the liquidity indicators set by the World Bank and IMF.’
The report further recommends that ‘the government is encouraged to take more caution regarding contracting new debt in the future, increase its revenue mobilisation, and continue to rationalise its expenditure to achieve sustainable debt.’
Mr Akol also raises concerns about how borrowed funds are being utilised.
‘I noted that 15 out of the 49 loan-funded projects included in the Project Implementation Plan between 2018/19 and 2023/24 financial years were implemented without having both the pre-feasibility and the detailed feasibility studies,’ the report reads.
‘There is a growing number of non-performing government loans meant to finance government projects and programmes. A total of five credit facilities were observed to be non-performing. The funds have not been put to use and the government is incurring costs in terms of interest repayments, commitment fees and associated penalties,’ it adds.
Solutions
Dr Enock Nyorekwa Twinoburyo, a senior economist at the Sustainable Development Goals Centre for Africa and former World Bank consultant, suggests that the government should boost domestic revenue collection to curb rising public debt.
‘As we talk today, looking at our debt profile, 48 percent of our debt is actually now domestic, and external is 52 percent. One of the reasons for domestic borrowing, of course, is the ease with which the government can raise financing from the domestic community,’ he notes.
‘But also because a lot of the saving groups within the economy do not have alternative investment options, and in very recent years, there’s been a great uptake.’
Dr Nyorekwa attributes both domestic and external borrowing to ‘stagnating with a low tax effort.’
‘For a long time, our tax-to-GDP ratio has stagnated at about 13 percent. And 13 percent is what you need to meet the basic functions of the state. But also tax effort and collection is the basic indicator of state efficiency in being able to organise, mobilise, deepen, and also it reflects, in part, lack of civic trust,’ he argues.
Why domestic borrowing
Mr Ggoobi explains that the rise in domestic borrowing is part of the government’s strategy to strengthen the domestic capital market and secure more predictable financing.
‘Overall, the shift towards higher domestic borrowing explains the rise in both the nominal debt stock and the cost of debt,” he says.
He emphasises the need for cautious fiscal management, noting that maintaining debt sustainability will require a balanced mix of external and domestic borrowing, enhanced revenue collection, and more efficient use of borrowed funds.
Mr Ggoobi adds that the government aims to ensure borrowed resources fuel economic growth that outpaces debt accumulation.
Debt crisis.
‘Almost 50 percent of the budget is for debt management (not even service). This implies reduced degrees of freedom for the government to address emerging critical needs such as the provision of social services (education and health) and basic infrastructure such as roads and energy,’ Dr Fred Muhumuza, the Director of Makerere University Business School Economic Forum and Trustee of the African Forum and Network on Debt and Development (AFRODAD).
Tracing the rising debt
Timeframe and total debt increase
Start Year: 2018
End Year: 2025
Duration: 7 years (from June 2018 to June 2025)
Debt in 2018: Shs41 trillion
Debt in 2025: Shs116 trillion
Total Increase: Shs116 trillion – Shs41 trillion = Shs75 trillion
Average annual debt increase
To find the average increase per year:
Shs75 trillion ÷ 7 years = approx. Shs10.71 trillion per year
Debt burden per citizen
2018: Shs1 million
2025: Shs2.5 million
Increase: Shs1.5 million over 7 years
Average annual increase per citizen: Shs1.5 million ÷ 7 ˜ Shs214,286 per year
What this means
Between 2018 and 2025, Uganda’s public debt rose by an average of Shs10.71 trillion per year, while GDP grew steadily at around 5-6 percent annually. The debt-to-GDP ratio increased from 41.3 percent in 2018 to about 52 percent in 2025, indicating a growing debt burden relative to economic output.