Uganda’s Borrowing Appetite Surpasses Fifty Percent Threshold Of GDP

By Black Star News

Photos: Wikimedia Commons

Focused on delivering results in trade and economic development on a path of leadership and service for Africa’s transformation, Gina Mugerwa, reacts on X (formerly twitter) to a story about how commercial banks in Uganda have become the biggest sources of financing just as public debt-to-GDP ratio touches 53%; an additional 3% above the recommended 50% threshold of GDP. And yet before even the new fiscal cycle begins on July 1, government has continued its borrowing spree in earnest.

“The key question is not simply whether debt is rising, but whether the borrowed money is generating enough economic returns to cover its costs and support future growth,” Mugerwa wrote on June 15. Her reaction follows CEO East Africa Magazine’s reporting that Uganda’s debt story is increasingly becoming a banking story. “Commercial lenders have financed billions of dollars in public projects as government faces tighter access to concessional funding. While the investments promise future growth, rising interest costs and debt-servicing obligations are drawing increasing scrutiny from economists and taxpayers alike,” the magazine reported on June 15. In the new budget, 54.6% will go towards domestic debt repayment while external debt servicing will swallow 45.4% of the national budget.

In FY2026/27, domestic revenue is projected to increase to Shs45.6 trillion (over USD12.5 billion) from Shs35.7 trillion (approximately USD9.7 billion) in FY2025/2026, equivalent to 15.9 percent of GDP, Finance minister Henry Musasizi said at the budget reading on June 11.

“Nearly 40% of Uganda’s FY2026/27 budget (UGX33.4 trillion [about USD9.7 billion]) is projected to go to debt servicing. What does this mean for funding education, health and other essential public services?” asks Uganda Debt Network (UDN) on June 15. UDN is a Kampala-based Non-Governmental Organization working towards a prosperous Uganda with sustainable, equitable development and a high quality of life of the people.

In the June 11-unveiled UGX 84.4 trillion (over USD23 billion)-weighty 2026/2027 national budget which takes effect on July 1, Human Capital Development (education—inclusive of teacher salary enhancements, health and AFCON 2027 preparations) has been allocated UGX13.5 trillion (about USD3.6 billion). From this amount, the breakdown for the whole education sector receives UGX 6.66 trillion (USD1.6 billion) of the pie. The health sector takes UGX 5.23 trillion (nearly USD1.3 billion); a rather drop from UGX 5.87 trillion (about USD1.4 billion) in the last fiscal allocations. Moreover, UGX536 billion (approximately USD149 million) is given to State House for snacks and drinks only. Taxpayers are expected to bear 52% of this heftiest budget yet.  

In partnership with Kenya and Tanzania, Uganda is slated to co-host Africa Cup of Nations tournament between June and July next year.

“Uganda’s public debt remains sustainable and is projected to stay so over the medium and long-term,” the Finance ministry said in a statement on June 15. According to the statement, Uganda’s public debt by December 2025 stood at USD 34.86 billion, equivalent to approximately UGX126.19 trillion. Of this, external debt amounted to USD 19.02 billion. This translates into a debt-to-GDP ratio of approximately 53.0 percent. Over the past 10 years, Uganda’s debt has financed strategic investments that are transforming the productive capacity of our economy,” the Finance ministry’s statement reads, before cautioning: “As we engage in post-budget dialogues, informed debates should be on both the money borrowed and how it has been used.”  In 2023, the Ombudsman discovered that Uganda loses about USD3 billion to corruption annually.

In his post-budget reading speech, Gen. Yoweri Museveni said: “As we implement the Financial Year 2026/27 Budget, we must remain focused on Uganda’s strategic goal of socio-economic transformation. Our economy is growing at 6.4% and is projected to expand to 10.2% next year, driven in part by petroleum. By fully utilizing our vast potential, taking advantage of the African market and ensuring that every household joins the money economy, we shall create prosperity for all Ugandans.”

But economic growth is not the same as economic development; the latter of which includes citizens having a purchasing power worthy of a dignified standard of living.

 “By addressing gaps in employment, debt, agriculture and digital access, Uganda can transform growth into prosperity,” says independent Daily Monitor’s Guest Writer, Bishop Samuel, on June 16. According to Bishop Samuel who is the Press Secretary to the First Deputy Prime Minister and Minister for East African Community Affairs, “Public debt, now at USD34.86 billion and 53 per cent of GDP, is described as sustainable, but the pace of borrowing raises concerns about long-term fiscal discipline, especially if oil revenues under perform…The 2026/2027 Budget set ambitious targets, but ambition must be matched with execution.”

Uganda discovered oil in June 2006. Its commercial production and eventual flow, however, has seen numerous rolling and slippery deadlines with the latest having been June/July 2026.