World Bank, AfDB and China hold biggest share of Uganda’s Shs85 trillion external debt

KAMPALA. Multilateral financial institutions hold the largest share of Uganda’s US$23.9 billion (about Shs85 trillion) external debt, accounting for more than half of the country’s public and publicly guaranteed foreign obligations, as government continues to depend on a mix of development partners and private creditors to finance its development programmes.

The World Bank’s International Debt Report 2026 shows that multilateral lenders held US$11.7 billion of Uganda’s public and publicly guaranteed external debt at the end of 2025, compared with US$3.6 billion owed to bilateral creditors and US$4.2 billion to private creditors.

The distribution places multilateral institutions at the centre of Uganda’s external financing, with the International Development Association (IDA), the World Bank’s concessional lending arm, emerging as the country’s largest individual creditor.

IDA held US$5.433 billion, followed by the African Development Bank (AfDB) with US$2.120 billion, while other multilateral institutions accounted for US$4.150 billion.

Among bilateral lenders, China was Uganda’s largest identified creditor, holding US$2.368 billion, followed by France with US$385 million.

The figures illustrate how Uganda’s development financing is spread across institutions and governments, with different lending arrangements, interest rates, repayment periods and grace periods.

Uganda’s total external debt stock stood at US$23.899 billion at the end of 2025, up from US$9.805 billion in 2015, representing an increase of about 144 per cent over the decade.

The total includes public and publicly guaranteed debt, private-sector borrowing and short-term external obligations.

Public and publicly guaranteed debt accounted for US$19.537 billion, while private nonguaranteed borrowing stood at US$3.738 billion. Another US$624 million was classified as short-term debt.

The creditor breakdown therefore shows that although government borrowing is concentrated among official development institutions, private creditors have also become an important source of financing.

However, the cost of accessing funds differs significantly between the two categories.

The World Bank’s country profile indicates that new commitments from private creditors to Uganda’s public sector in 2025 carried an average interest rate of 8.7 per cent, compared with 2.6 per cent for official creditors.

Official lenders offered an average maturity of 30 years and a grace period of seven years, while private creditors offered an average maturity of 20 years and a grace period of only one year.

The difference has implications for the timing and cost of repayments, particularly for infrastructure and other investments that require several years before generating sufficient economic returns.

A grace period is the period during which a borrower is not required to repay the principal, although interest payments may still be required depending on the loan agreement.

The higher interest rates and shorter grace periods associated with private borrowing can place greater pressure on public finances, particularly where projects take time to become commercially productive.

The World Bank says the trend is not unique to Uganda.

Across International Development Association-eligible countries, new private-sector lending commitments to public entities carried an average interest rate of 8.2 per cent in 2025, compared with 2.7 per cent for official creditors.

The difference widened to 5.5 percentage points, reflecting the increasingly expensive conditions under which lower-income countries are accessing private capital.

Foreign investors in domestic debt

Beyond external loans, foreign investors also held US$2.8 billion in Uganda’s domestic-currency government debt in 2025, according to the World Bank report.

These holdings are distinct from the US$23.9 billion external debt stock because they represent government securities issued in the domestic market but owned by non-residents.

The foreign ownership of domestic government securities provides another channel through which international investors participate in financing Uganda’s public expenditure.

It also exposes government financing to changes in investor appetite, global interest rates and perceptions of risk, which could influence demand for domestic securities and the cost of future borrowing.

The report does not indicate that foreign investors are preparing to withdraw their holdings, but their participation highlights the growing connection between Uganda’s domestic financing requirements and international investment decisions.

Debt burden and repayment capacity

The World Bank’s figures also provide a mixed picture of Uganda’s capacity to manage its external obligations.

External debt stood at 39 per cent of gross national income in 2025, while debt service represented four per cent of GNI.

Measured against exports, external debt was equivalent to 145 per cent, while debt service accounted for 13 per cent.

Compared with 2015, the external debt-to-GNI ratio increased by 0.3 per cent, while the debt-service-to-GNI ratio rose by 18.1 per cent, according to the relative changes presented in the report.

On the other hand, the external debt-to-exports ratio declined by 20.2 per cent, while the debt-service-to-exports ratio fell by 6.1 per cent.

The figures suggest that growth in export earnings has helped improve some external debt indicators, even as the cost of servicing debt has increased relative to national income.

However, the country profile does not provide the actual amount Uganda paid in principal and interest during 2025, nor does it establish how much of the national budget was absorbed by external debt repayments.

Uganda’s debt position comes amid increasing pressure on developing economies, whose combined external debt stock reached a record US$9.4 trillion in 2025, following a 5.5 per cent increase during the year.

Debt service payments by developing countries reached US$1.4 trillion, marking the fifth consecutive annual increase.

The World Bank also reported that public bond issuance rose by nearly 35 per cent to US$251 billion, the highest level in five years, as governments increasingly turned to capital markets to finance their needs and refinance existing obligations.

The report warns that rising debt-service costs are reducing the fiscal space available to developing economies, limiting resources that could otherwise support infrastructure, healthcare, education and other public services.

For Uganda, the distribution of external debt raises questions not only about the amount borrowed but also the cost of different financing sources, the repayment schedules and the economic returns generated by projects funded through the loans.

With multilateral institutions accounting for the largest share of public and publicly guaranteed external debt, their concessional financing remains important to Uganda’s development funding strategy.

However, the relatively expensive terms of new private borrowing and the growing participation of foreign investors in domestic government securities underscore the need for careful management of the country’s overall financing mix.

The World Bank report provides a snapshot of Uganda’s external debt position at the end of 2025, but determining whether the borrowing is generating sufficient economic returns requires further examination of government debt statistics, project performance and public expenditure.