economy 11 June 2026 Daily Monitor (Uganda)
Uganda's soaring debt servicing costs threaten development agenda
Uganda faces a significant challenge as debt servicing is projected to consume nearly 40 percent of the national budget for the 2026/27 financial year, raising concerns about its impact on development priorities and economic growth. The country's total public debt has surged to over Shs130 trillion, driven by borrowing for infrastructure and post-pandemic recovery. Source: https://www.monitor.co.ug/uganda/news/national/rising-public-debt-poses-risk-to-uganda-s-development-agenda-5493610
Uganda’s escalating public debt and the substantial cost of servicing it are casting a shadow over the nation’s long-term development aspirations. The government’s borrowing has intensified to fund crucial infrastructure projects, mitigate the economic fallout from the COVID-19 pandemic, and address persistent budget deficits.
The latest figures from the Bank of Uganda reveal a concerning trend: Uganda’s total public debt stock ballooned by 21.2 percent to Shs130.22 trillion by January 2026, a substantial increase from the previous year. While the central bank deems the debt sustainable, the growing debt servicing burden is straining public finances.
The pressure on public finances is palpable, with debt servicing obligations set to claim a staggering 45.3 percent of domestic revenue in the 2025/26 financial year. This trend is projected to continue at around 40 percent over the medium term, a rate described as unsustainable by the Bank of Uganda.
Economists warn that this escalating debt repayment commitment severely limits the government’s capacity to invest in vital sectors like health, education, and infrastructure. It also curtails the ability to respond effectively to economic shocks and can even complicate monetary policy.
For the upcoming 2026/27 fiscal year, a colossal Shs33.4 trillion has been earmarked for debt servicing alone. This makes debt repayment the single largest expenditure item in the Shs84.3 trillion national budget, eclipsing investments in crucial development projects. Experts like Dr. John Mutenyo from Makerere University emphasize that while borrowing isn’t inherently bad, excessive servicing costs divert funds from essential public services and can stifle economic growth.
While Uganda’s debt-to-GDP ratio remains within international thresholds, economists like Dr. Brian Sserunjogi stress the importance of efficiently utilizing borrowed funds. Strengthening public investment management and ensuring borrowed resources fuel projects that generate economic returns are crucial, alongside fostering a stronger national savings culture.
The path forward requires a delicate balance between financing development needs and ensuring fiscal prudence. The successful management of debt, coupled with improved revenue collection and judicious spending, will be critical in determining whether Uganda’s borrowing strategy acts as an engine for growth or becomes a significant impediment to its development potential.