Uganda’s government has announced a dramatic 98% reduction in external borrowing to address the country’s mounting debt. This move comes amid rising concerns over the sustainability of public finances and the potential for a debt crisis.
The Ministry of Finance also revealed significant cuts to both government spending and domestic borrowing for the fiscal year 2025-26. In a bid to ease the growing debt burden, public spending will be slashed by more than 20%, while domestic borrowing through Treasury bonds will be reduced by 54%. These measures are aimed at preventing further fiscal strain and safeguarding the country’s economic stability.
Uganda’s public debt has risen sharply, climbing from $23.7 billion in 2022 to $25.6 billion in June 2023. The debt now accounts for over half of the country’s Gross Domestic Product (GDP), marking a record high of 52%.
The escalating debt levels have raised alarm among economic experts, who warn that without urgent intervention, Uganda could face a full-blown debt crisis. Although the government maintains that borrowed funds have been directed toward boosting economic growth, critics point to the negative consequences, including recent downgrades in the country’s credit rating.
In a statement to Anadolu, Ramathan Ggoobi, Uganda’s permanent secretary in the Ministry of Finance, acknowledged the challenges faced by the country, including high inflation and rising interest rates. However, he assured the public that fiscal and monetary policymakers are committed to ensuring that the debt does not derail the nation’s economic progress.
“Despite the challenges, Uganda’s economy has expanded to approximately $53 billion, and foreign direct investment has increased due to sound economic management. Our goal is to ensure that public debt does not hinder our growth,” said Ggoobi.
The government has emphasized that fiscal consolidation efforts are well underway, with a focus on sustaining economic growth as a long-term solution to managing the debt burden.
The World Bank’s latest International Debt Report has highlighted the growing risks faced by developing nations, noting that record debt levels, combined with high interest rates, have pushed many countries toward financial distress. The report also warned that prolonged high interest rates will force many governments to choose between servicing their debts and investing in critical sectors such as health, education, and infrastructure.
