Uganda’s public debt has crossed the UGX130 trillion mark — a milestone that, depending on who you ask, is either a sign of a growing economy hungry for capital or a warning light on the dashboard of fiscal prudence. The truth, as is often the case with sovereign debt, lies somewhere in between. Pedson Mumbere reports.
According to the Ministry of Finance’s latest Quarterly Debt Statistical Bulletin, Uganda’s total debt stock stood at UGX130.844 trillion (approximately €32.1 billion) at the close of December 2025, edging up from UGX128.648 trillion just three months prior.
Domestic debt now commands the lion’s share at 54.5 percent of the total, driven by increased issuance of Treasury bills and bonds, while external obligations account for the remaining 45.3 percent — heavily weighted toward multilateral lenders such as the World Bank’s IDA, the IMF, and the African Development Fund.
Let us be clear: there is nothing inherently wrong with borrowing. Every functioning economy — from the United States to Singapore — carries debt.
The critical question is not whether to borrow, but how and for what. Debt deployed into productive infrastructure, education, agriculture, and trade capacity is not a burden; it is an investment in tomorrow’s revenue. Roads built today carry goods to market for decades.
Universities financed through sovereign credit produce the engineers and entrepreneurs who generate the tax base of the future. Uganda’s undisbursed loan commitments — which grew to $3.74 billion — include funding for biomedical sciences education, livestock resilience, and trade finance.
These are exactly the kinds of investments that justify deficit financing.
The same logic applies broadly across Africa, a continent where the infrastructure financing gap runs into hundreds of billions of dollars annually.
For African governments navigating tight fiscal spaces, borrowing — particularly from multilateral lenders at concessional rates — remains an indispensable tool of development. The risk is not debt itself; it is debt misapplied.
And that is where vigilance becomes non-negotiable.
Ibrahim Mugume, a senior economist at the Economic Policy Research Centre (EPRC), offers a measured but pointed assessment of Uganda’s current trajectory.
“Elevated domestic borrowing by government tends to exert upward pressure on interest rates, potentially crowding out private sector credit and dampening investment momentum,” he told this publication in a phone interview. “This dynamic could weigh on medium-term growth prospects if not carefully managed,” he added.
The crowding-out concern is particularly acute in an economy where the private sector remains the primary engine of job creation and wealth generation.
When the government competes aggressively with businesses for available credit, the result is a two-tier squeeze: commercial lending rates climb, and smaller enterprises — those without the collateral or scale to absorb elevated borrowing costs — are effectively shut out of financing markets.
Mugume also raises a separate but related concern about Uganda’s swelling undisbursed debt balance. Persistent growth in undisbursed debt suggests bottlenecks in project implementation and absorption capacity.
This not only delays economic returns but may also result in additional costs, including commitment fees,” he warned.
This is a challenge that resonates across the continent. African governments frequently secure loans that sit idle for months or years due to weak procurement systems, bureaucratic delays, or insufficient technical capacity on the ground.
The result is a double loss: the development impact is deferred, and the country pays for financing it has yet to use.
Uganda’s bilateral and private creditor exposure also warrants close watching.
China’s Exim Bank holds $2.1 billion of the external debt stock, while Stanbic Bank leads private creditor exposure at $0.82 billion.
Unlike concessional multilateral financing, these facilities typically carry higher costs and less flexible terms — a consideration that should inform future borrowing decisions.
The Ministry of Finance maintains that Uganda’s debt remains within sustainable thresholds, and for now, the numbers broadly support that position. But sustainability is not a static condition.
It is earned through disciplined revenue collection, targeted expenditure, and rigorous project execution.
Borrowed money, wisely invested, can be transformational. The challenge — and the obligation — is to make sure it is.
