Govt unveils new strategy to manage public debt

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Uganda’s government says it is tightening efforts to manage the country’s rising public debt as pressure grows globally on developing economies struggling with borrowing costs, repayment obligations and shrinking fiscal space.

In a statement posted on its official X account on May 15, the Ministry of Finance outlined a series of measures it plans to implement in the 2026/27 financial year to keep public debt under control while continuing to fund national development projects.

The ministry described Uganda’s debt levels as “moderately elevated,” a phrase economists often use to mean that debt remains manageable for now but requires close monitoring to prevent future financial strain. Uganda’s total public debt rose to sh 130.8 trillion by the end of 2025, according to the latest Ministry of Finance public debt data.

Public debt refers to money borrowed by the government from local and international lenders to finance infrastructure projects, public services and budget deficits. Uganda, like many developing countries, has significantly increased borrowing over the past decade to fund roads, dams, energy projects and industrial infrastructure.

But rising global interest rates, weaker currencies and growing repayment obligations have increased pressure on many African economies, forcing governments to look for new ways to reduce borrowing risks.

The Ministry of Finance says one of its biggest priorities now is improving domestic revenue collection.

According to the statement, the government will continue implementing the Domestic Revenue Mobilisation Strategy, including tighter enforcement against tax evasion using the Electronic Fiscal Receipting and Invoicing Solution, commonly known as EFRIS.

EFRIS is a digital tax monitoring system introduced by the Uganda Revenue Authority (URA) to improve transparency in business transactions and reduce underreporting of sales. The system automatically tracks invoices and receipts, helping tax authorities identify businesses that may be avoiding taxes.

The government says the strategy is already showing results.

Revenue collection has nearly doubled over the last five years, rising from Shs17 trillion in the 2019/20 financial year to Shs32 trillion in 2024/25.

That increase matters because stronger domestic revenue reduces reliance on borrowing.

Simply put, the more money the government collects internally through taxes and economic activity, the less pressure it faces to finance budgets through loans.

The ministry also says Uganda plans to increase access to concessional financing from institutions such as the World Bank and International Monetary Fund.

Concessional financing refers to loans offered on more favourable terms than commercial borrowing. These loans usually come with lower interest rates and longer repayment periods, making them less financially burdensome for governments.

Uganda’s shift toward concessional financing reflects a broader trend across Africa as countries attempt to move away from expensive commercial debt accumulated during years of aggressive infrastructure expansion.

Another key measure involves expanding non-debt financing options.

The ministry says the government will implement the Public Investment Financing Strategy to leverage alternative financing mechanisms, including the planned Uganda Sovereign Sukuk.

A Sovereign Sukuk is a form of Islamic-compliant financing that differs from conventional government bonds because it is linked to tangible assets or projects rather than interest-based lending. Uganda hopes the planned Sukuk issuance will help diversify financing sources for infrastructure development.

The government also plans to strengthen Uganda’s international credit profile through the implementation of the Country Credit Rating Strategy.

Credit ratings are assessments issued by global agencies measuring a country’s ability to repay debt. Stronger ratings can help governments borrow at lower costs because investors view them as less risky.

According to the ministry, Uganda is currently rated “Positive” by S&P Global Ratings at B-, “Stable” by Fitch Ratings at B, and also “Stable” by Moody’s at B3.

These ratings remain below investment grade but are important signals for international lenders and investors monitoring Uganda’s economic stability.

The final measure outlined by the ministry focuses on reducing the pressure that debt repayments place on the national budget.

The government says it will implement the 2026/27 Medium Term Debt Management Strategy aimed at lowering the share of interest payments compared to domestic revenue.

In practical terms, this means the government wants to reduce the amount of collected tax revenue that goes toward paying interest on loans instead of funding services such as healthcare, education and infrastructure.