The Independent Uganda: You get the Truth we Pay the Price
Kampala, Uganda | THE INDEPENDENT | Uganda’s total public debt stock increased to USD 34.86 billion (UGX 131.2 trillion) by the end of December 2025, up from USD 34.21 billion (UGX 128.7 trillion) at the end of September 2025.
This is despite the debt service totaling UGX1.563 trillion. The 52.7 % of GDP, is higher than the cap that the East African Community Countries had set as a ceiling to ensure that the debt levels remain sustainable.
Uganda’s ratio, however, is only higher than Tanzania’s 48 percent, and the Ministry of Finance insists that this makes the debt level sustainable.
The government also says that most of the debt, said to be tagged on the oil revenues expected later this year, is got for infrastructure, and therefore growing and benefiting the future economy, one reason the level should not be worrying.
According to the December 2025 debt portfolio analysis by the ministry, domestic debt accounted for 54.5 percent of the total or about USD 19.02 billion (UGX 68.86 trillion), while external debt amounted to USD 15.84 billion (UGX 57.33 trillion).
This quarterly increase stemmed majorly from rising domestic debt issuances with more focus on borrowing locally and less from the international market. This is because external debt, especially commercial debt is riskier than local credit.
Multilateral creditors, holding 65.13 percent of Uganda’s external debt stock equivalent to USD 10.32 billion remain the largest holders of external debt. This is mainly concessional lenders; the International Development Association (IDA), International Monetary Fund (IMF) and African Development Fund (AfDF) which collectively hold the largest share of Uganda’s external debt stock, equivalent to 54.7 percent of the external debt portfolio.
Among bilateral creditors, Exim Bank of China and UKEF are the largest, holding USD 2.1 billion and USD 0.39 billion, respectively. For private creditors, Stanbic Bank leads with a holding of USD 0.82 billion during the same period.
Permanent Secretary and Secretary to the Treasury, Ramathan Ggoobi, says their intention is also to reduce non-concessional borrowing to reduce on the debt servicing burden.
Between September and December 2025, the share of concessional debt increased slightly from 54.8 to 55.3 percent due to increased disbursements from concessional creditors such as the World Bank, African Development Fund, and the Islamic Development Bank, among others.
Over the same period, non-concessional debt declined from 5.46 to 5.27 percent while semi-concessional debt decreased from 19.73 to 19.44 percent. In contrast, the share of commercial debt increased marginally from 19.97 to 19.98 percent.
External debt stock, disbursed and outstanding, decreased from USD 15.89 billion as at end September 2025 to USD 15.84 billion by end of December 2025, primarily due to principal payments amounting to USD 315.2 million, along with the contribution from exchange rate variations.
These factors were sufficient to outweigh the disbursement of USD 302.7million, according to the analysis. Over the second quarter of 2025/26 registered an increase in total external debt service to USD 416.62 million (UGX1.563 trillion) from USD 381.52 million in the previous quarter, following an increase in principal and fees payments during the period.
On the other hand, the total domestic debt stock at cost increased from UGX 63,936 billion in September 2025 to UGX 68,856 billion in December 2025, driven by a 7.1 percent rise in the stock of Treasury bills, which grew from UGX 7,954 billion to UGX 8,680 billion, and in Treasury bonds which rose from UGX 55,983 billion to UGX 59,669 billion. In addition, domestic debt service decreased by UGX 916 billion to UGX 2.997 trillion.
At almost 53% of GDP, the debt level approaches Uganda’s medium-term fiscal anchor of 50-55%, with IMF assessments noting adequate repayment capacity albeit growing risks from volatile commodity prices and climate impacts on revenues.
According to the Ministry’s and IMF analysis, Uganda’s debt profile remains sustainable with moderate risk, thoughwith rising domestic debt, which experts say calls for domestic revenue growth to cater for debt servicing and other expenditures.
Experts, primarily from the IMF and World Bank through their joint Debt Sustainability Analysis (DSA) framework for low-income countries, assess Uganda’s public debt as sustainable in the medium to long term, but with a moderate risk of debt distress. They cite positive drivers including the robust economic growth, low inflation rates, strong foreign exchange reserves and targeted, and targeted concessional loans.
On the other hand, there are risks like the fluctuating fiscal deficits, rising reliance on domestic borrowing, potential portfolio outflows, commodity shocks, oil project delays, and emerging concerns like climate-related vulnerabilities.
Other analysts are opposed to the comparison of the debt stock with the size of the economy (GDP) to determine its sustainability, which is the main criteria used by the Ministry, IMF and World Bank.
The debt-to-GDP ratio remains the most widely used benchmark for several reasons and provides a standardised, comparable measure across countries and over time. It reflects the size of the economy that ultimately backs the debt through taxation and growth potential.
The idea behind this is that a growing economy can “grow out” of debt if growth exceeds interest rates. However, analysts say it has limitations so full assessment of debt sustainability requires looking at multiple indicators and dynamics.
GDP can be volatile and, in some cases, overstated or underreported, especially in low-income countries with large informal sectors or weak statistical systems. So, this method does not directly measure repayment capacity of a government, according to analysts.
Also the economy can encounter abrupt shocks like commodity price drops, climate events, slower growth, which the Debt-to-GDP ratio does not put into account.
Others say that it does not entirely consider the structure of debt or its composition, interest burdens, and rollover risks. Debt sustainability is ultimately about whether a government can meet current and future obligations without unrealistic adjustments, default, or explosive debt dynamics. Other things to consider include debt service and interest payments as percentage of revenue.
This directly shows the burden on the budget, which many analysts consider more prudent than debt-to-GDP rations, especially when interest eats into social services spending on health, education, and other public investment.
Economist, Dr Fred Muhumuza, cautions against over-relying on the debt-to-GDP ratio as the sole benchmark for sustainability because even when the ratio appears moderate or around 50 percent, it masks deeper problems.
Instead, he prefers focus on debt service and revenue burdens. He says, for instance that Uganda spends over 30 percent of domestic revenue on interest payments alone, far above the sub-Saharan African average of about 14 percent.
This, according to him is a clear sign of distress. This diverts resources from essential sectors like health, education and infrastructure, and crowds out private investment. He describes Uganda’s “safety situation” as a “debt trap,” where borrowing cycles worsen without productive use.
He claim is that borrowing in Uganda is politically driven, not out of economic necessity, with lack of proof that borrowings generate sufficient returns or growth to offset costs.
On the government turning more and more towards domestic borrowing, Muhumuza says that the interest rates, between 15 and 19 percent for domestic date, are too high.
He warns of falling into a deeper crisis if fiscal discipline is not enforced, including rationalising spending, reducing unnecessary borrowing, and prioritizing growth-enhancing investments like agriculture and energy.
On his part, Julius Mukunda, the Executive Director, Civil Society Budget Advocacy Group, says while the Debt-to-GDP ratio is a widely used measure and an important indicator, it is insufficient on its own and that other parameters must be considered to give a better picture on debt sustainability.
These include domestic interest servicing as a share of domestic revenue (excluding grants).
According to Mukunda, focusing only on the ratio overlooks the extent of the debt burden in terms of repayment pressure on revenues. Mukunda stresses that focus should be put on how borrowed funds are utilised, the absorption capacity for projects, and overall debt management rather than just the headline ratio.
“Even if the ratio reached 100 percent, the critical question is productive use of debt, not the percentage itself.”
Like Muhumuza, Mukunda stresses the need for spending discipline including fighting supplementary budgets, fiscal and budgeting indiscipline, rising debt service costs, and weak revenue mobilisation.
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