The stock of government-backed loan guarantees rose significantly in the 2024/25 financial year, increasing from $120m (Shs444.4b) to $200m (Shs740.4b), Finance Ministry Annual Contingent Liabilities Report shows.
The report shows that the number of active government guarantees rose from 12 to 15 during the year, mainly due to new financing facilities secured by Uganda Development Bank (UDB).
However, two guarantees were fully repaid before the end of the period, reducing the total number of active guarantees to 13.
The report also shows a sharp increase in the amount of approved loans that had not yet been disbursed, which grew from $14.5m (Shs53.7b) in December 2024 to $84.5m (Shs312.65b) in December 2025 because most of the newly approved loans had not yet been drawn down.
As a result, although the value of guarantees rose, the actual amounts released remained lower.
What are contingent liabilities?
They arise from government guarantees, legal claims, loans extended to public institutions, contractual commitments, public-private partnerships, and other financial arrangements.
Financial experts often describe contingent liabilities as hidden fiscal risks because they can unexpectedly turn into government obligations during periods of economic difficulty.
If such obligations materialize, government would be required to allocate public funds to meet them, increasing pressure on public debt levels.
Thus, in notes published with the report, Finance Permanent Secretary and Secretary to the Treasury, Ramathan Ggoobi, said obligations arising from government guarantees to state-owned enterprises, legal proceedings, on-lending arrangements, and contractual commitments represent potential claims on public resources and therefore require close monitoring.
Government efforts during the year, he said, focused on supervising guarantees, monitoring state-owned enterprises and extra-budgetary units to manage on-lent facilities, assessing public-private partnership exposures, and evaluating liabilities arising from legal disputes, noting that institutional controls, stronger financial reporting, and enhanced coordination among government agencies continue to play an important role in reducing unmanaged risks.
Ggoobi also noted that careful management and transparent disclosure of contingent liabilities were essential for maintaining investor confidence.
UDB dominates guaranteed loans
The report shows that the guarantee portfolio remains heavily concentrated in two beneficiaries, including UDB and Islamic University in Uganda (IUIU).
By December 2024, UDB accounted for about $38.8m (Shs143.6b) in outstanding guaranteed debt, representing 80 percent of the total exposure.
On the other hand, IUIU held three guarantees with outstanding debt amounting to $9.5m (Shs35.15b).
By December 2025, UDB’s exposure had increased significantly to $66m (Shs244.2b) following the approval of new facilities, while during the same period, IUIU’s exposure rose slightly to $10.3m (Shs38.11b).
As a result, UDB now accounts for 86 percent of all outstanding government-guaranteed debt, increasing concentration risk within the portfolio.
Despite this, the Ministry of Finance noted that UDB continues to demonstrate strong debt-servicing capacity and maintains a high credit rating, indicating a very low likelihood of default.
Major lenders shift
The report also highlights changes in the institutions providing loans backed by government guarantees.
In December 2024, the largest lenders were the OPEC Fund for International Development, with exposure of $16.3m (Shs60.31b), Arab Bank for Economic Development in Africa (BADEA), with $11.9m (Shs44.03b), and the Islamic Development Bank with $10m (Shs37b). Others included the African Development Bank and Exim India.
But by December 2025, the Islamic Corporation for the Development of the Private Sector had become the largest lender, with $30m (Shs111b) in guaranteed exposure linked to UDB.
At the same time, exposure to the OPEC Fund and BADEA declined due to repayments, while exposure to the Islamic Development Bank increased slightly as additional funds were disbursed under an existing facility.
The European Investment Bank also recorded a rise as disbursements began under a new credit line.
Sector allocations
The financial sector continues to receive majority of government-backed guarantees. In December 2024, it accounted for 81 percent of total guaranteed exposure.
By December 2025, this share had risen to 86 percent. The education sector, represented solely by IUIU, accounted for the remaining portion of the guarantee portfolio.
Low risk
The value of disbursed and outstanding guaranteed debt increased from $48.3m (Shs178.71b) in December 2024 to $76.3m (Shs282.31b) in December 2025 as loan disbursements outpaced repayments.
However, the Ministry of Finance noted that the overall fiscal risk remains limited, with guarantees accounting for only 0.09 percent of Gross Domestic Product (GDP) in 2024 and 0.14 percent in 2025, well below government’s policy ceiling of 5 percent.
According to the report, this indicates that contingent liabilities arising from government guarantees currently pose only a minimal direct burden on the budget.
The report shows that repayments under government’s guaranteed loan portfolio will be highest in the medium term, with scheduled repayments expected to peak at $16.46m (Shs60.9b) this year before gradually declining.
Annual repayments are projected to fall to $16.13m (Shs59.68b) in 2027, and $14.93m (Shs55.24b) in 2028, but the burden is expected to remain relatively high through 2029 and 2030 before easing further in 2031 and 2032.
Data highlights the growing importance of effective risk management as the portfolio of government-backed guarantees continues to expand.
While current exposure remains low relative to the size of the economy, the increasing concentration and the rising value of outstanding commitments underline the need for continued oversight to protect public finances.