Analysis: Rising borrowing pushes Uganda’s public debt to ugx130 trillion

Uganda’s public debt has crossed the UGX130 trillion mark, reflecting continued government borrowing to finance development priorities and budgetary needs.

While the increase remains within government projections, analysts say the latest figures highlight the growing importance of prudent debt management and stronger revenue generation to sustain fiscal stability.

According to the Quarterly Debt Statistical Bulletin and Public Debt Portfolio Analysis for December 2025 released by the Ministry of Finance, Planning and Economic Development, Uganda’s total public debt stock rose from US$34.21 billion (UGX128.6 trillion) in September 2025 to US$34.86 billion (UGX130.9 trillion) by the end of December 2025.

Domestic borrowing driving debt growth

The latest data shows that domestic borrowing remains the main driver of the increase in Uganda’s debt stock. Domestic debt accounted for 54.5% of the total public debt, equivalent to US$19.02 billion (UGX68.86 trillion), while external debt made up 45.3%, equivalent to US$15.84 billion (UGX57.33 trillion).

The Finance Ministry attributed the quarterly increase largely to increased domestic debt issuances, typically raised through government securities such as treasury bills and bonds.

Domestic borrowing has become an increasingly preferred financing option for government in recent years, partly due to tightening global credit conditions and the desire to limit exposure to external currency risks. However, economists warn that heavy reliance on domestic markets could crowd out private sector borrowing by pushing up interest rates.

Debt service pressures easing slightly

Despite the rising debt stock, Uganda registered a decline in domestic debt servicing costs during the quarter. Government expenditure on domestic debt service fell by UGX916 billion, dropping from UGX3.913 trillion in September 2025 to UGX2.997 trillion by December.

This decline may provide short-term fiscal relief for the treasury, which has in recent years faced growing pressure from rising debt servicing obligations that compete with spending on social services and infrastructure.

However, external debt servicing increased during the same period. The second quarter of FY2025/26 saw Uganda spend US$416.62 million (UGX1.563 trillion) on external debt repayments, up from US$381.52 million in the previous quarter. The increase was largely driven by higher principal repayments and related fees.

Rising undisbursed loans signal future borrowing

Another notable trend in the report is the growth in undisbursed debt, which rose from US$3.36 billion (UGX12.6 trillion) in September 2025 to US$3.74 billion (UGX14.03 trillion) by December.

Undisbursed loans represent funds already contracted but not yet drawn down for projects, meaning they could add to the country’s debt stock in the future once disbursements are made.

The increase was mainly driven by new loans secured during the quarter from several international lenders including the African Development Fund, the Arab Bank for Economic Development in Africa, the International Fund for Agricultural Development and the OPEC Fund for International Development.

These loans are expected to support sectors such as biomedical education, trade finance, livestock resilience and development financing through the Uganda Development Bank.

Multilateral lenders dominate external debt

The report also reveals that multilateral institutions remain Uganda’s largest external creditors. Multilateral lenders account for 65.13% of the country’s external debt stock, equivalent to US$10.32 billion.

Among these, the International Development Association, the International Monetary Fund and the African Development Fund collectively hold 54.7% of Uganda’s external debt portfolio.

Among bilateral creditors, the Export-Import Bank of China is the largest lender with US$2.1 billion, followed by the UK Export Finance with US$0.39 billion.

In the private creditor category, Stanbic Bank Uganda holds the largest share with US$0.82 billion.

Currency risks remain a key concern

The currency composition of Uganda’s external debt also highlights potential exchange rate risks. About 46% of the external debt stock is denominated in US dollars, equivalent to US$7.28 billion, followed by 35% in euros, 8% in Chinese yuan, and 6% in Japanese yen.

This means fluctuations in global exchange rates, particularly the strengthening of the US dollar, could significantly increase the cost of servicing Uganda’s external debt.

Balancing development needs and fiscal sustainability

Uganda has continued to borrow to finance infrastructure projects, energy investments and social development programmes aimed at accelerating economic growth.

However, the growing debt burden raises important policy questions about the country’s fiscal sustainability. Analysts say the government will need to strengthen domestic revenue mobilisation, ensure borrowed funds are invested in productive sectors, and maintain strict discipline in public expenditure to prevent debt levels from becoming unsustainable.

As Uganda pursues its long-term development ambitions, the challenge will be striking a balance between borrowing to finance growth and maintaining a manageable debt burden for future generations.