Uganda’s Debt Bill Takes Nearly 40% of Budget as Development Funds Tighten

Nearly four out of every 10 shillings in Uganda’s 2026/27 national budget are allocated to servicing debt, squeezing the money available for schools, hospitals and infrastructure. According to Nile Post Uganda (direct), economists warn that the pressure is not simply about how much the government owes. It is also about whether borrowed money reaches projects ready to use it and delivers enough benefit to justify the repayment bill.

The Finance Ministry’s latest debt bulletin puts total public debt at Shs136.06 trillion at the end of June 2026, compared with Shs116.2 trillion a year earlier. That amounts to 54.3% of gross domestic product, the measure of the economy’s output. Domestic debt accounts for Shs76.32 trillion, while external debt stands at Shs59.74 trillion. The figures show the scale of the obligations facing the government as it tries to fund development and essential services.

The budget sets aside about Shs33.4 trillion for debt servicing—payments of interest and money borrowed—out of total spending of Shs84.3 trillion. Interest alone is projected at roughly Shs12.4 trillion. Economists cited by Nile Post warn that these commitments leave less room to finance healthcare, education, infrastructure and job creation. The challenge is to meet repayment obligations without allowing them to crowd out the spending needed for development.

Borrowing before projects are ready

Herbert Kafeero, deputy executive director of the Southern and East Africa Trade Information and Negotiations Institute in Uganda, identified weak public investment management as a central problem. That means shortcomings in how the government plans projects and puts public money to work. He questioned whether borrowing decisions are matched to clear purposes and projects ready to proceed, arguing that some loans support work that is poorly thought through or fails to deliver the expected value.

“Weak public investment management, that’s where the problem is,” Kafeero said.

The ministry’s own economic update points to a bottleneck in using financing already secured. By December 2025, concessional loans—borrowing on favourable terms—had an absorption rate of just 45.5%, a measure of how much financing had been used. About $5.51 billion remained undisbursed. The ministry plans to clean up its loan portfolio and speed up procurement, land acquisition and counterpart funding, the government’s contribution to financed projects.

Economists also linked the pressure to corruption and misuse of public resources. They pointed to repeated Auditor General findings of mismanagement, misuse and losses across government institutions. Their argument is that money lost in this way could instead fund development priorities and ease the need for further borrowing. They called for loans to be contracted only when projects are properly planned and for the proceeds to be used for their intended purpose.

Revenue growth offers another route

Stronger domestic revenue collection is another priority identified by the experts. The Finance Ministry says tax receipts rose from Shs16 trillion in 2019/20 to Shs36 trillion in 2025/26. Yet taxes remain relatively low at 14.3% of economic output. Uganda’s oil sector could provide additional revenue, but economists cautioned that those proceeds would need careful management and investment in productive sectors to help reduce reliance on debt.

The next test is whether the government can turn existing financing into functioning projects while strengthening its own revenue base. The ministry’s efforts to clear procurement, land and funding hurdles will be important to watch, alongside the management of potential oil income. For development spending, the issue is not only access to new loans, but whether each borrowed shilling produces an economic and social return.