By KT Reporter
Members of Parliament have renewed calls for the Executive to urgently implement recommendations aimed at tackling Uganda’s escalating debt levels.
According to the Auditor General’s report and an analysis by the Uganda Debt Network (UDN), Uganda’s public debt has surged from USD 35.1 billion in FY2018/19 to USD 46.8 billion in FY2023/24—an alarming 104% increase in just six years.
By September 2024, Uganda’s total debt stood at 110 trillion Shillings (including domestic arrears), representing 54.5% of the country’s Gross Domestic Product (GDP). Debt servicing alone consumes nearly a third of domestic revenue, with domestic borrowing at 13 trillion Shillings and external borrowing reaching 97 trillion Shillings.
The UDN has identified several factors undermining Uganda’s debt sustainability, including high debt levels, rising debt servicing costs, low tax revenue, inefficiencies in tax collection, excessive tax exemptions, weak institutional capacity, project delays, and poor governance.
Speaking at a dialogue on the Auditor General’s 2024 Report at the Sheraton Hotel on Wednesday, Patrick Tumwebaze, Executive Director of UDN, highlighted the magnitude of Uganda’s debt burden. He noted that with the country’s population at 45.9 million, each citizen would need to contribute at least 2.39 million Shillings to fully clear the national debt.
Feta Geoffrey, Ayivu East Constituency MP, criticized the government’s persistent delays in providing counterpart funding for key infrastructure projects, which has led to non-compliance with budget control guidelines and compromised sustainability.
Similarly, Rachael Magoola, Woman MP for Bugweri District, decried the rampant corruption that has led to public funds being misappropriated under the guise of borrowing.
Although Uganda’s debt-to-GDP ratio has slightly declined to 46.8%, external debt-to-GDP remains high at 57.2%, highlighting the country’s heavy reliance on domestic borrowing to finance budget deficits. Concerns persist over fiscal sustainability, particularly the growing debt service burden, which limits credit access for the private sector and constrains future economic policy flexibility.
The UDN’s recommendations are based on the Auditor General’s 2024 report, which scrutinizes the government’s fiscal management. The report underscores the need for the Executive to comprehensively review borrowing practices, curb excessive debt accumulation, and eliminate unnecessary costs, such as commitment fees on unused loans.
To achieve long-term debt sustainability and promote inclusive development, the UDN has recommended the following: strengthening public financial management; enhancing domestic revenue collection, shifting to concessional borrowing, reducing domestic borrowing, efficient management of oil revenue, improved project assessment and budgeting, and transparency in borrowing.
The report also criticized the government’s trend of writing off debts and buying shares in private companies—such as DEI Biopharma, Roko, Atiak, and AYA Group—without adequate financial justification.
Uganda’s total public debt has steadily increased, reaching 48.4% of GDP in FY2021/22. In response, the Ministry of Finance, Planning, and Economic Development (MoFPED) prioritized debt servicing in FY2022/23 to reduce the risk of unsustainable debt, though this led to budget cuts in key sectors.
The country’s rising debt service burden has raised concerns among credit rating agencies regarding Uganda’s creditworthiness and its ability to secure future financing on favourable terms.
Currently, 32.8% of revenue is spent on debt repayment, meaning that for every 100 Shillings collected, 33 Shillings is allocated to debt servicing. This signals a looming debt trap, where borrowing is increasingly used to settle existing obligations rather than fund development.
The Bank of Uganda (BoU) projects that external debt servicing will account for 35% of GDP by the end of FY2024/25. Meanwhile, Uganda’s debt-to-exports ratio stands at 265.4%, indicating significant pressure on foreign exchange reserves as export earnings are increasingly being diverted toward debt repayment.
With a worsening balance of trade, experts warn that unless decisive action is taken, Uganda’s fiscal health will continue to deteriorate, further limiting economic growth and development opportunities-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
