Uganda’s Debt Rises to 50.9% of GDP, But Remains Sustainable, Says Finance Ministry
KAMPALA – Uganda’s public debt stock has increased to USD 32.24 billion (UGX 115,895.1 billion), equivalent to 50.9% of Gross Domestic Product (GDP), according to the latest Debt Sustainability Analysis (DSA) report for the Financial Year 2024/25 released by the Ministry of Finance, Planning and Economic Development.
The figure marks a significant rise from the USD 25.59 billion (46.6% of GDP) recorded in the previous financial year. In present value (PV) terms—which accounts for the concessionality of loans—public debt stood at 45.3% of GDP, up from 40.4% in FY2023/24.
Drivers of Debt Accumulation
The report attributes the increase in debt to two main factors: the lump sum payment of Bank of Uganda advances through the issuance of securities worth Shs 7,779 billion, and increased development expenditure, particularly in the oil and gas sector, as the country prepares for first oil in FY 2026/27.
For the first time in recent years, domestic debt (52.1% of total) surpassed external debt (47.9%), a shift partly attributed to tighter global financing conditions. The composition of domestic debt also saw a notable shift, with pension and provident funds overtaking commercial banks as the largest holders of government securities, accounting for 31.5% of the total.
Moderate Risk of Debt Distress
Despite the increase in debt levels, the DSA concludes that Uganda’s public debt remains sustainable over the medium to long term. The country is assessed to be at a moderate risk of overall debt distress.
The analysis projects that the debt-to-GDP ratio will peak at 55.5% in FY 2025/26, driven by election-related spending and high interest costs, before beginning a gradual decline. The PV of debt-to-GDP is expected to remain below the key benchmark of 55% and the stricter East African Monetary Union convergence ceiling of 50%.
Vulnerabilities and Risks
However, the report highlights several vulnerabilities, most notably a sharp increase in the debt service burden. The ratio of debt service to domestic revenues jumped to 35.7% in FY2024/25 and is projected to peak at 45.3% in the coming fiscal year, underscoring the pressure on the national budget.
The DSA also warns that under extreme shock scenarios—such as a sharp slowdown in economic growth or a collapse in exports—key indicators like the PV of external debt to exports would breach sustainable thresholds.
Potential downside risks identified include delays in oil production, a fall in international coffee or oil prices, higher-than-projected borrowing costs, and lower revenue outturns.
Government’s Mitigation Strategy
To safeguard debt sustainability, the government has outlined a multi-pronged strategy focused on fiscal consolidation. This includes accelerating the implementation of the Domestic Revenue Mobilization Strategy (DRMS) to boost tax collection, rationalizing public expenditure, and prioritizing highly concessional financing over commercial loans.
The report also emphasizes fast-tracking the “ten-fold growth strategy” and completing high-impact infrastructure projects, particularly in the energy and transport sectors, to generate economic returns that will support future debt repayment.
In the foreword of the report, the Permanent Secretary and Secretary to the Treasury, Ramathan Ggoobi, stated that the findings “will inform Uganda’s debt management strategy and promote evidence-based decision making for fiscal and debt sustainability.”
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