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Public debt remains sustainable — Finance minister Musasizi
"Public debt should always be assessed alongside the assets it finances and the economic returns it generates. Over the past 10 years, Uganda's debt has financed strategic investments that are transforming the productive capacity of our economy," Musasizi said.
Musasizi said Uganda's debt has funded strategic projects in transport, energy, water, agro-industrialisation, education, health infrastructure, housing and industrial development over the last decade.
By: John Odyek, Journalist @New Vision
KAMPALA - Finance Minister Henry Musasizi has defended the Government's borrowing strategy, arguing that public debt has been used to finance investments aimed at expanding Uganda's productive capacity and supporting long-term economic growth.
Musasizi said Uganda's debt has funded strategic projects in transport, energy, water, agro-industrialisation, education, health infrastructure, housing and industrial development over the last decade.
He said the investments were intended to strengthen the foundations for economic transformation and wealth creation.
In his 2026/27 Budget Speech presented to Parliament and the public last week, the minister maintained that Uganda's public debt remains sustainable despite its growth, and is projected to remain so over the medium and long term.
He said borrowing has supported investments that are transforming the country's productive sectors.
However, civil society organisations have expressed concern about the rising level of public debt and its impact on public finances. According to Musasizi, as of December 2025, Uganda's total public debt stood at $34.86b (sh126.19 trillion). Of this, external debt $15.84 b (sh58.9 trillion), while domestic debt stood at $19.02b (sh70.7 trillion).
This translates into a debt-to-GDP (Gross Domestic Product) ratio of approximately 53.0 percent.
"Public debt should always be assessed alongside the assets it finances and the economic returns it generates. Over the past 10 years, Uganda's debt has financed strategic investments that are transforming the productive capacity of our economy," Musasizi said.
According to the minister, integrated transport infrastructure accounted for the largest share of debt-financed investments at 31.1 percent, followed by electricity infrastructure at 19.3 percent and water infrastructure at 10.3 percent.
Other sectors financed through borrowing include agro-industrialisation at 9.2 percent, education and health infrastructure at 7.7 percent, housing and urban development at 6.3 percent, and industrial parks and industrial development at 2.0 percent.
However, civil society organisations have expressed concern about the rising level of public debt and its impact on public finances. According to Musasizi, as of December 2025, Uganda's total public debt stood at $34.86b (sh126.19 trillion). Of this, external debt $15.84 b (sh58.9 trillion), while domestic debt stood at $19.02b (sh70.7 trillion).
This translates into a debt-to-GDP (Gross Domestic Product) ratio of approximately 53.0 percent.
"Public debt should always be assessed alongside the assets it finances and the economic returns it generates. Over the past 10 years, Uganda's debt has financed strategic investments that are transforming the productive capacity of our economy," Musasizi said.
According to the minister, integrated transport infrastructure accounted for the largest share of debt-financed investments at 31.1 percent, followed by electricity infrastructure at 19.3 percent and water infrastructure at 10.3 percent.
Other sectors financed through borrowing include agro-industrialisation at 9.2 percent, education and health infrastructure at 7.7 percent, housing and urban development at 6.3 percent, and industrial parks and industrial development at 2.0 percent.
Musasizi said other investments, including national backbone infrastructure to extend internet connectivity, Science, Technology and Innovation, and regional development initiatives, accounted for 7 percent of debt-financed spending.
The budget speech identifies domestic revenue mobilisation as a key strategy for reducing reliance on external financing and strengthening debt sustainability.
Government projects domestic revenue collections to increase to sh45.6 trillion in the 2026/27 financial year from sh35.7 trillion in the 2025/26 financial year.
The minister said government has made progress towards fiscal self-reliance, noting that domestic revenues financed up to 80.9 percent of the discretionary budget in 2025/26.
He described domestic revenue mobilisation as a sovereignty objective that would enhance policy independence, resilience and sustainability. He added that government would continue implementing the Domestic Revenue Mobilisation Strategy while preserving incentives for investment and enterprise growth.
Julius Mukunda, the Executive Director of the Civil Society Budget Advocacy Group (CSBAG), called on government to rationalise borrowing and debt refinancing to reduce fiscal pressure and improve sustainability.
Mukunda warned that increased borrowing is placing pressure on the country's fiscal position.
Speaking to New Vision after the budget was read, Mukunda said the total public debt rose from sh69.2 trillion in 2018 to sh115.4 trillion in 2025, driven by growth in both domestic and external borrowing.
He noted that the trend reflects continued reliance on debt to finance strategic investments and budget deficits.
According to Mukunda, said debt servicing is consuming an increasing share of public resources. Of the Sh84.29 trillion national budget for 2026/27, about Sh32.8 trillion (39.2 percent) of the budget has been allocated to debt servicing.
The debt servicing bill includes sh14.1 trillion for interest payments, sh13.97 trillion for domestic debt refinancing and sh4.18 trillion for external debt repayments. Budget analysts argue that the rising cost of servicing debt is reducing the fiscal space available for essential public services and development programmes.
Mukunda observed that borrowing and debt refinancing account for nearly one-third of the FY2026/27 resource envelope.
While domestic revenue contributes 47 percent of the financing framework, about 31 percent is expected to come from borrowing and debt refinancing.
He warned that continued dependence on debt financing exposes the country to fiscal risks and could undermine long-term economic stability if not matched by stronger domestic revenue mobilisation.
Mukunda recommended broader domestic revenue mobilisation, improved tax administration and stronger compliance measures to reduce dependence on borrowing while ensuring adequate financing for development priorities.
He highlighted the rise in domestic arrears, which increased from sh2.57 trillion in 2018 to sh13.8 trillion in 2025.
Mukunda argued that growing arrears, combined with rising public debt obligations, signal mounting pressure on public finances and could affect government's ability to meet its commitments to suppliers, contractors and service providers.
The budget speech identifies domestic revenue mobilisation as a key strategy for reducing reliance on external financing and strengthening debt sustainability.
Government projects domestic revenue collections to increase to sh45.6 trillion in the 2026/27 financial year from sh35.7 trillion in the 2025/26 financial year.
The minister said government has made progress towards fiscal self-reliance, noting that domestic revenues financed up to 80.9 percent of the discretionary budget in 2025/26.
He described domestic revenue mobilisation as a sovereignty objective that would enhance policy independence, resilience and sustainability. He added that government would continue implementing the Domestic Revenue Mobilisation Strategy while preserving incentives for investment and enterprise growth.
Julius Mukunda, the Executive Director of the Civil Society Budget Advocacy Group (CSBAG), called on government to rationalise borrowing and debt refinancing to reduce fiscal pressure and improve sustainability.
Mukunda warned that increased borrowing is placing pressure on the country's fiscal position.
Speaking to New Vision after the budget was read, Mukunda said the total public debt rose from sh69.2 trillion in 2018 to sh115.4 trillion in 2025, driven by growth in both domestic and external borrowing.
He noted that the trend reflects continued reliance on debt to finance strategic investments and budget deficits.
According to Mukunda, said debt servicing is consuming an increasing share of public resources. Of the Sh84.29 trillion national budget for 2026/27, about Sh32.8 trillion (39.2 percent) of the budget has been allocated to debt servicing.
The debt servicing bill includes sh14.1 trillion for interest payments, sh13.97 trillion for domestic debt refinancing and sh4.18 trillion for external debt repayments. Budget analysts argue that the rising cost of servicing debt is reducing the fiscal space available for essential public services and development programmes.
Mukunda observed that borrowing and debt refinancing account for nearly one-third of the FY2026/27 resource envelope.
While domestic revenue contributes 47 percent of the financing framework, about 31 percent is expected to come from borrowing and debt refinancing.
He warned that continued dependence on debt financing exposes the country to fiscal risks and could undermine long-term economic stability if not matched by stronger domestic revenue mobilisation.
Mukunda recommended broader domestic revenue mobilisation, improved tax administration and stronger compliance measures to reduce dependence on borrowing while ensuring adequate financing for development priorities.
He highlighted the rise in domestic arrears, which increased from sh2.57 trillion in 2018 to sh13.8 trillion in 2025.
Mukunda argued that growing arrears, combined with rising public debt obligations, signal mounting pressure on public finances and could affect government's ability to meet its commitments to suppliers, contractors and service providers.