Finance Minister defends Uganda’s public debt position
Musasizi said Government is taking measures to strengthen debt management and ensure borrowed funds generate returns capable of supporting repayment.
Finance Minister Henry Musasizi said Government would continue to balance the need to finance strategic investments with the need to maintain debt sustainability.(Photo by Maria Wamala)
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Finance Minister Henry Musasizi has assured Parliament that Uganda’s public debt remains sustainable over the medium to long term despite a sharp increase in the country’s debt stock.
Addressing Members of Parliament on the Economy Committee on Wednesday, August 12, Musasizi said Government is taking measures to strengthen debt management and ensure borrowed funds generate returns capable of supporting repayment.
He was responding to concerns about Uganda’s public debt position, debt sustainability, external financing, contingent liabilities and domestic arrears.
The Minister told the legislators that Uganda’s total public debt stock increased by 19.96 per cent, from $29.06b (sh105.17 trillion) at the end of December 2024 to $34.86b (sh126.16 trillion) by December 2025. Of the total debt stock, $15.84b was external debt while $19.02b was domestic debt.
Musasizi attributed the increase largely to increased domestic borrowing to finance the fiscal deficit and continued Government investment in strategic infrastructure projects intended to support economic transformation and long-term growth.
He cautioned that the sustainability of public debt should not be judged solely by the size of the debt stock, but also by the country’s capacity to service its obligations.
“Debt sustainability should be assessed not only by the nominal debt stock, but also by the economy’s capacity to service the debt,” Musasizi said.
As a proportion of the economy, nominal public debt rose from 46.86 per cent of GDP in June 2024 to 50.90 per cent in June 2025.
Despite the increase, Musasizi said Uganda’s debt position remains sustainable, pointing to Government’s fiscal consolidation measures, including efforts to strengthen domestic revenue mobilisation, rationalise public expenditure and improve spending efficiency.
He also cited anticipated oil revenues and implementation of the Government’s Ten-Fold Growth Strategy as measures expected to strengthen the economy and improve the country’s capacity to meet its debt obligations.
However, the Minister acknowledged that the rising debt stock presents risks, particularly the growing cost of debt servicing.
“Government will continue to strengthen debt management, prioritise concessional and cost-effective financing, enhance domestic revenue mobilisation and ensure borrowed funds are directed towards productive investments that generate sufficient returns to support repayment,” he said.
On externally financed projects and programmes, Musasizi reported that commitments stood at $18.23b as of December 2025.
However, only $8.59b had been disbursed, representing 47.16 per cent of the committed funds.
The Minister said Government was working with implementing agencies and development partners to accelerate project implementation and improve the pace of disbursement.
He stressed that faster disbursement should be accompanied by proper implementation to ensure externally financed projects deliver the economic and social benefits for which the loans were contracted.
The concern over low absorption of external financing comes as Government continues to rely on development partners to finance major infrastructure and other strategic projects, while also facing increasing pressure from debt servicing obligations.
Musasizi also informed the members that Government’s contingent liabilities increased by sh1.61 trillion, or 8.5 per cent, from Sh18.96 trillion in June 2024 to Sh20.57 trillion in June 2025.
He attributed much of the increase to legal proceedings against Central Government, including land compensation disputes, contractual claims arising from infrastructure projects and other statutory obligations.
Contingent liabilities are obligations that may require Government to make payments in future if specified events occur, potentially placing additional pressure on the national budget.
The Minister said Government was monitoring such obligations as part of efforts to contain risks to public finances.
Central Government accounted for sh8.54 trillion, representing 98.45 per cent of the arrears, while Local Governments accounted for sh134.83b, equivalent to 1.55 per cent.
The Minister said Government was tightening commitment controls and expenditure management to prevent the accumulation of new arrears.
He added that the Public Finance Management framework was being enforced while verified and approved obligations would be progressively cleared.
“Government is strengthening commitment controls and expenditure management and enforcing the Public Finance Management framework to prevent new arrears while progressively clearing verified and approved obligations,” Musasizi said.
The disclosure on arrears comes amid continued concerns about Government entities accumulating unpaid obligations to contractors, suppliers and service providers, which can affect businesses and disrupt delivery of public programmes.
Musasizi maintained that borrowing remains necessary to finance development, particularly where public investment is expected to expand productive capacity and generate economic growth.
He nevertheless emphasised that Government must ensure that borrowed funds are used efficiently and that projects financed through debt provide value for money.
He reaffirmed Government’s commitment to responsible borrowing and prudent debt management, with emphasis on productive investment, fiscal sustainability and value for money.
In response, MPs on the committee expressed concern over the growing debt levels, debt-servicing costs and the extent to which borrowed funds are translating into economic growth and improved public services.
Jane Avur Pacuto (Pakwach District), the Committee chairperson, asked the minister to monitor the debt movement and put in place measures to maintain it within acceptable levels.
Musasizi said Government would continue to balance the need to finance strategic investments with the need to maintain debt sustainability, arguing that stronger domestic revenue mobilisation, efficient public spending and productive investment are critical to protecting the country’s fiscal position over the medium and long term.