Uganda’s public debt has surpassed $34 billion, intensifying concerns about the country’s ability to repay its creditors.

 

The debt stock rose sharply from $25 billion in 2023/24 to $32 billion in 2024/25, driven by heavy domestic borrowing to plug budget deficits and a one-off loan settlement with the Bank of Uganda (BoU).

By October 2025, national debt had reached Ush126 trillion ($34.7 billion), according to central bank data.

The Finance ministry issued a Ush7.7 trillion ($2 billion) 10-year treasury bond to clear an outstanding BoU loan taken during the Covid-19 lockdown for budget support.

Tax revenue shortfalls widened from Ush1.2 trillion ($331.8 million) in 2019/20 to Ush2 trillion ($553 million) in 2020/21 as restrictions crippled economic activity, forcing the government to borrow from the central bank and commercial lenders. Settlement of the BoU loan is one of the International Monetary Fund’s preconditions for access to a new facility.

Domestic borrowing now accounts for 52 percent of the debt portfolio, compared with 48 percent owed to external lenders, Finance ministry data shows. The debt-to-GDP ratio stood at 50.9 percent in June 2025, while the debt-servicing-cost-to-tax-revenue ratio rose from 23 percent in 2023/24 to 35.7 percent in 2024/25, squeezing funds available for social services.

T-bills, bond yields downTreasury bonds made up 87.2 percent of government securities issued, with treasury bills accounting for 12.8 percent.

Recent auctions — including lower acceptance levels for long-term instruments, rejection of several bids and wide spreads between amounts offered and accepted — have pushed yields down. The 364-day treasury bill fell to about 14 percent early this year. Last week, the three-year bond yield dropped to 13.295 percent, the 10-year to 14.5 percent and the 20-year to 15.49 percent.

Auction data shows Ush230 billion ($63.5 million) was offered for the three-year bond, with Ush218.943 billion ($60.5 million) accepted. For the 10-year bond, Ush330 billion ($91.2 million) was offered and Ush310.282 billion ($85.7 million) taken up. The 20-year bond attracted Ush430 billion ($118.9 million), of which Ush419.272 billion ($115.9 million) was accepted.

Dr Kenneth Egesa, BoU’s communications director, said the government met much of its domestic borrowing needs in the first half of 2025/26.“That means reduced pressure on the domestic debt market at this time and reduced yields on government securities as well,” he said.

He added that offshore institutional investors had discounted bids to maximise uptake, anticipating monetary easing in East Africa.

A one-year bill priced at 12–14 percent offers more breathing space for borrowers than a 15 percent yield, the official said, speaking on background.“Uganda’s open capital account, flexible exchange rate, low inflation and effective pricing of securities will sustain offshore interest, though political risk remains unresolved. Foreign investors are very concerned about what could happen after Museveni is gone,” the trader said.

Easing political uncertaintyEconomists warn that rising debt limits resources for social services, constrains liquidity and could weaken Uganda’s credit profile.

Kenneth Legesi, a financial analyst, said lower yields may reflect easing political uncertainty after the January 15 general election.“The government has indicated plans to cut debt in the next financial year but, with development support expected to remain low, pressure will mount on tax collection. Yields could rise again later this year if macroeconomic indicators deteriorate.”

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