The Civil Society Budget Advocacy Group (CSBAG) has warned that Uganda’s economy is at risk due to persistent domestic borrowing and low tax collections.
Executive Director Julius Mukunda stated that the country’s total public debt has risen to Shs120 trillion, with half of it being domestic, and that the government is paying 15-17 per cent interest on domestic debt compared to 2-3 per cent on concessional loans.
“Uganda’s total public debt has risen to about Shs120 trillion, half of which Shs60 trillion is domestic. Borrowing from local banks now accounts for 50 per cent of total public debt, up from 30 per cent in FY2021,” Mukunda said.
He added that interest payments have risen to Shs7 trillion in FY2025, up from Shs3 trillion in 2019, meaning that for every Shs100 collected in taxes, Shs25 is spent on interest alone.
Mukunda advised the government to prioritise concessional financing, reduce high-interest domestic debt, and enforce fiscal discipline by limiting supplementary budgets to genuine emergencies.
“The government should prioritise concessional financing and reduce high-interest domestic debt. Each percentage point drop in domestic interest rates could save Uganda Shs300-400 billion annually,” he said.
The S and P Global Ratings revised Uganda’s Economic Outlook from “Stable” to “Positive”, citing the economy’s resilient growth, strong external trade position, and recovery momentum. However, Mukunda warned that growing domestic debt burden, persistent supplementary budgets, and low tax revenues threaten fiscal credibility and inclusive growth.
“We need to expand taxes by ensuring that everyone pays their fair share. We have also engaged the Uganda Revenue Authority (URA) to partner with districts to strengthen rental and property tax collection,” Mukunda said.
Mukunda emphasized the need for the government to address national content challenges, such as technical capacity and financial access, to ensure that the benefits of oil and gas are fully realized by all Ugandans. He also called for transparency in the management of oil revenues, saying that the government should ensure that the Petroleum Fund is managed transparently.
The S and P Global Ratings also based their decision on Uganda’s strong and resilient growth, record-rise in foreign exchange reserves, improved external balance, return of concessional financing, low inflation, and currency stability, and a thriving banking sector.
Mukunda further noted that Uganda’s positive rating outlook is encouraging, but the government must ensure that growth is inclusive, borrowing is affordable, and public money delivers real value.
“CSBAG remains committed to working with government and partners to promote fiscal responsibility, debt transparency, and citizen participation in national budgeting so that every shilling borrowed and spent transforms lives,” he said.