Uganda saves Shs270b debt in Umeme buyout

KAMPALA. The government avoided taking on about Shs270 billion in additional debt after the Auditor General’s assessment reduced the amount required to buy out electricity distributor Umeme Limited at the end of its 20-year concession.

Parliament had authorised the government to borrow up to the euro equivalent of $190.99 million, about Shs711 billion, to finance the buyout.

However, the government eventually borrowed only $118.39 million, equivalent to about Shs440 billion, leaving approximately $72.6 million, or Shs270 billion, of the approved borrowing ceiling unused.

The amount borrowed was therefore nearly 38 per cent below the maximum authorised by Parliament.

Documents submitted to Parliament on Tuesday, however, show that the lower borrowing requirement did not entirely settle the financial issues arising from Umeme’s exit.

The company retained the right to seek reconciliation of the final buyout amount, supplementary payments, damages and interest. This could leave the government with additional financial obligations depending on negotiations or the outcome of any dispute-resolution process.

A report presented to Parliament by the Minister of State for Finance, Planning and Economic Development, Ms Shartsi Kutesa Musherure, details how the government mobilised and used the funds after Parliament approved the borrowing in March 2025.

The report, dated August 12, 2026, and signed by Finance Minister Henry Musasizi, accounts for the loan contracted and the amount eventually paid to Umeme.

It explains that government did not need to raise the full amount Parliament had authorised because the Auditor General’s special audit established a lower verified payout.

“Only USD 118,385,603 recommended by the Auditor General as payout to UMEME Limited was borrowed by the Government, and paid to UMEME Limited within the conditions set out in the Parliamentary Resolution,” the report says.

The amount translates to about Shs440 billion at the indicative exchange rate used in the report.

Parliament’s conditions

When Parliament approved the borrowing on March 20, 2025, it set a ceiling of $190.99 million, equivalent to about Shs711 billion at current exchange rates.

However, legislators directed government to pay Umeme only an amount that had been verified, approved or recommended by the Auditor General before March 31, 2025.

Parliament further provided that any amount below the approved borrowing ceiling would be cancelled and would not become part of Uganda’s public debt.

The Finance Minister was also required to report back to Parliament on the actual amount paid to Umeme.

The Auditor General’s final special audit report, dated March 26, 2025, recommended a payout of $118.39 million.

Government subsequently entered into a financing agreement with Stanbic Bank Uganda Limited and Standard Bank of South Africa Limited.

It eventually drew €106.81 million, equivalent to the approved $118.39 million, instead of borrowing the maximum amount sanctioned by Parliament.

The Finance Ministry documents show that government requested the €106.81 million facility on May 29, 2025. The funds were transferred to the Government of Uganda’s euro holding account at the Bank of Uganda before being used for the buyout.

The arrangement meant that the unused portion of the parliamentary borrowing authority did not translate into additional public debt.

Debt control

The Umeme buyout illustrates the role of parliamentary controls and independent verification in limiting government borrowing.

Article 159 of the Constitution allows government to borrow, but requires borrowing, guarantees and loans to be authorised by or under an Act of Parliament.

Loan terms and conditions must also be presented to Parliament for approval.

Parliament is further required to receive information on the country’s indebtedness, debt servicing and the utilisation and performance of public loans.

Article 160 defines public debt broadly to include the principal amount, interest and costs associated with managing the debt.

The Public Finance Management framework reinforces these requirements by placing public borrowing under ministerial responsibility, parliamentary approval and fiscal accountability.

In the Umeme case, government ultimately borrowed only the amount independently recommended by the Auditor General, while the remaining borrowing authority approved by Parliament was not converted into public debt.

However, the possibility of further claims by Umeme means the final cost of the concession exit may not yet be fully settled.