Uganda’s debt still sustainable despite sharp rise, minister says

Uganda’s finance minister has told parliament that the country’s public debt remains sustainable over the medium and long term, even after it climbed by almost a fifth in a year and crossed a key regional ceiling.

Henry Musasizi, appearing with finance ministry officials before parliament’s Committee on the National Economy, said the debt stock had grown by 19.96% in 2025.

He said it rose from $29.06bn (about 105.17tn shillings) at the end of December 2024 to $34.86bn (126.16tn shillings) a year later. Of that, $15.84bn was owed to external lenders and $19.02bn was domestic — meaning the government now owes more at home than abroad.

Measured against the size of the economy, Musasizi said nominal debt rose from 46.86% of GDP in June 2024 to 50.90% a year later. Independent trackers put the ratio higher still — around 53% by the end of 2025 — above the 50% ceiling set under the East African Community’s convergence criteria and above the level the International Monetary Fund recommends.

Uganda’s own latest sustainability assessment rates the country at moderate risk of debt distress, while judging the debt sustainable in the medium to long term.

Musasizi blamed the rise mainly on domestic borrowing to cover the budget deficit and on continued spending on major infrastructure. He argued that sustainability should be judged not by the size of the debt alone, but by whether the economy can afford to service it.

He said the government’s fiscal plans — raising more tax revenue, cutting wasteful spending, earning oil money and pursuing its “ten-fold growth” strategy — would keep the debt manageable.

But he acknowledged the risks, chief among them the rising cost of servicing the debt. The Bank of Uganda has warned that high borrowing costs are weighing on the budget, with interest payments projected to reach 4.7% of GDP this financial year, up from 3.7%.

Musasizi said the government would prioritise cheaper, concessional loans and make sure borrowed money went into investments that generate returns.

On externally funded projects, he said commitments stood at $18.23bn at the end of December, of which $8.59bn — about 47% — had been disbursed.

He said contingent liabilities — costs the government could be forced to meet, such as guarantees or legal claims — had grown from 18.96tn shillings in June 2024 to 20.57tn shillings a year later, a rise of 8.5%, largely from court cases including land compensation and disputes over infrastructure contracts.

Domestic arrears — bills the government owes but has not paid — stood at an audited 8.68tn shillings for 2024/25, almost all of it, 98.45%, owed by central government.

The scale of the borrowing has drawn criticism. Some analysts and MPs argue parliament has waved through successive loans without properly weighing whether they were needed or would pay off, putting its oversight of the debt under fresh scrutiny.

Musasizi said the government remained committed to responsible borrowing and value for money.