Funding pressures continue to push government into acquiring more expensive debt despite signals of the existence of distress. Photo / File
As of September last year, each Ugandan carried a debt burden of Shs2.3 million, representing their share of the nation's staggering Shs107 trillion public debt, according to a researcher from the Uganda Debt Network.
Ms Peninah Nayiga, the assistant research officer, stated that excluding domestic arrears, Uganda’s public debt reached Shs107 trillion by September 2024, a figure higher than the government's official estimate, which omits certain variables.
“When you divide Shs107 trillion by the total population of 45.9 million, it means that every Ugandan is currently indebted to Shs2.3 million,” she explained during a March 13 stakeholder dialogue on the Auditor General’s Report 2024. The event, organised by WFD, drew participants from Parliament, the Ministry of Finance, and academic researchers.
She further noted that approximately Shs20 trillion is allocated to debt servicing, funds that could otherwise be directed towards crucial development programs in rural areas.
In its annual Debt Sustainability Report FY2023/24, released on February 7, 2024, the Ministry of Finance, Planning and Economic Development reported that Uganda’s total public debt increased from $23.66 billion (Shs86.779 trillion) in FY 2022/23 to $25.59 billion (Shs94.869 trillion) in FY 2023/24.
The country’s external debt rose from $14.24 billion (Shs52.206 trillion) to $14.63 billion (Shs54.236 trillion) between June 2023 and June 2024, while domestic debt grew from $9.43 billion (Shs34.573 trillion) to $10.96 billion (Shs40.633 trillion) over the same period.
As a percentage of GDP, public debt showed a slight downward trend, decreasing from 47.41 percent in June 2023 to 46.8 percent in June 2024. However, when measured in present value terms, the stock of public debt increased to 40.4 percent of GDP, up from 36.7 percent in the previous financial year, largely due to the rise in domestic debt, which lacks concessionality.
WFD organised the dialogue to examine the growing impact of public debt on national budget allocations for essential services, debt repayment obligations, and Uganda’s creditworthiness.
Speaking at the event, Ms Lillian Paporu, the Woman Member of Parliament for Arua District, emphasised that national budget planning should be based on realistic assessments of available resources.
“We need technocrats to provide active guidance to ministers, preventing the inclusion of unfunded programs that lead to excessive borrowing,” she said.
Similarly, Mr Gilbert Musinguzi, the quality assurance manager at Uganda Debt Network, recommended that the government reduce domestic borrowing due to high-interest rates that crowd out private lending. He also advocated for the effective and transparent management of oil revenues to reduce dependence on debt financing.
Appeal
“Strengthening public investment through rigorous project analysis and monitoring is crucial to mitigate the risk of contingent liabilities,” he said.
“Furthermore, reducing frequent supplementary budget requests, which create fiscal imbalances and hinder long-term planning, and setting realistic macroeconomic forecasts are essential,” he added.
The Finance Ministry projects that Uganda's debt-to-GDP ratio will rise to 52.7 percent by June 2025 and peak at 53.0 percent in FY 2025/26 before gradually declining.
“The present value of debt is also expected to increase to a peak of 46.8 percent of GDP in FY 2025/26, just below the 50 percent threshold stipulated by the East African Monetary Union (EAMU) convergence criteria,” the ministry stated.
The government conducts an annual Debt Sustainability Analysis (DSA) in compliance with the Charter for Fiscal Responsibility and the Public Finance Management Act of 2015.
Ms Nayiga suggested that increasing export earnings through enhanced agricultural production and other exportable goods, as well as strengthening the Parish Development Model, are key strategies for minimising heavy public borrowing.
