There is something far more worrying than Uganda’s rising public debt.
It is this: while our debt is increasing faster than our revenues, we are paying dearly for loans we do not even use.
That is not just inefficiency. It borders on criminal negligence.
According to the latest Civil Society Budget Advocacy Group update , Uganda paid Sh73.9 billion in commitment fees in FY2023/24 alone for undisbursed loans. Between 2018 and 2024, we paid nearly Sh470 billion in penalties on funds that were signed, negotiated, and committed—but never properly utilised because projects were unprepared.
Fifteen out of 49 loan-funded projects reportedly had no feasibility studies whatsoever.
Let us pause there.
We are borrowing at scale. We are breaching our own fiscal guardrails. We are watching debt servicing swallow an ever-growing share of domestic revenue. And yet we are signing loans for projects that have not even been properly designed.
This is not a debt crisis in the classical sense. It is a governance crisis.
Borrowing Faster Than We Can Earn
Uganda’s total public debt now stands at about $32.24 billion—roughly Sh118 trillion as of June 2025 . That is a 26% increase in just 12 months.
The debt-to-GDP ratio has breached the 50% ceiling embedded in our Charter of Fiscal Responsibility, hitting 50.9% and projected to rise further.
Now, debt can grow faster than revenues during periods of high investment. That is not unusual. Countries borrow ahead of growth cycles. We did it when infrastructure gaps were glaring. We are doing it again in anticipation of oil production.
But borrowing faster than revenue growth only makes sense if the borrowed money is efficiently deployed and yields returns greater than its cost...
What we are witnessing instead is this: debt rising, interest payments rising, and money wasted on idle commitments.
We are compounding liabilities without compounding assets.
From Prudence to Elastic Budgets
Two decades ago, when Uganda first dipped into the domestic bond market, the sums were modest. In January 2004, government raised Sh20 billion via a two-year bond. It was tentative. Cautious.
Before that, Treasury bills were largely instruments of monetary policy—to mop up excess liquidity and manage inflation.
Today, the domestic market is the mainstay of budget financing. We routinely raise hundreds of billions in a single auction. Treasury bills and bonds outstanding now hover around Sh58–60 trillion, with bonds accounting for over Sh50 trillion.
Domestic resource mobilisation is, in theory, a sign of maturity. Poor countries are poor because they cannot mobilise their own savings. A functioning bond market shows institutional depth—banks, pension funds, insurance companies all pooling capital.
But mobilisation without discipline is merely self-lending without accountability.
And the discipline is thinning.
In FY2023/24, government requisitioned and received Sh8.93 trillion in supplementary funding on top of a Sh52.73 trillion regular budget—yet total expenditure came in lower than the original allocation . More recently, Sh14 trillion was introduced via corrigenda with limited time for parliamentary scrutiny.
A budget that keeps expanding mid-year ceases to be a plan. It becomes an improvisation.
Markets can tolerate borrowing. They are less tolerant of drift.
The Silent Appropriation Called Interest
Perhaps the most chilling statistic is this: debt servicing consumed 20.99% of domestic revenue in FY2023/24—well above the 12.5% ceiling government committed to . Projections suggest that by FY2026/27, nearly 45% of domestic revenue could go toward servicing debt.
Almost half of every shilling collected domestically would go to honour past borrowing.
Interest is the most efficient spender in the national budget. It never delays. It never goes unpaid. It always comes first.
Yet interest builds no classrooms, plants no crops, drills no boreholes.
When debt servicing expands, it crowds out agriculture, health, education, and child protection.
We speak of transformation. But transformation is not funded by interest payments.
The Opportunity Cost of Poor Planning
The most indefensible aspect of our current trajectory is not that we borrow. It is that we borrow without readiness.
Commitment fees arise when loans are signed but funds remain undisbursed within agreed timelines. In effect, lenders charge you for reserving capital you fail to utilise.
This is analogous to booking a fleet of trucks for delivery and then never loading the goods. You still pay.
The Mbarara–Masaka transmission line and Kampala road rehabilitation projects were among those affected by implementation delays . These are not trivial undertakings. They are central infrastructure components.
When 15 projects lack feasibility studies, the problem is systemic. Feasibility studies are not bureaucratic luxuries. They are the foundation of sound borrowing.
Borrowing without feasibility is fiscal recklessness.
If a private CEO borrowed billions without project design, shareholders would demand resignations. In the public sphere, the bill is quietly passed to taxpayers.
Risky Bets in the Name of Industrial Policy
The governance concerns do not stop at undisbursed loans.
Nearly Sh930 billion has reportedly been invested in private enterprises without proper procedures, due diligence, or parliamentary approval . Some investments were executed without valuation reports.
Industrial policy is not inherently flawed. Strategic state intervention can catalyse sectors.
But industrial policy without process becomes patronage. And patronage financed by debt amplifies fiscal risk...
Every shilling deployed without scrutiny compounds vulnerability.
The Domestic Borrowing Paradox
Ironically, one of Uganda’s strengths has been the deepening of its domestic capital market. Institutions like NSSF have grown substantial asset bases. Banks and insurers are active participants in government securities.
Countries transform when they mobilise domestic resources effectively. External aid is unstable; domestic savings are sustainable.
But when government absorbs the majority of available liquidity, the private sector feels the squeeze.
Why lend to SMEs at uncertain risk when you can earn double-digit returns on risk-free sovereign bonds?
Credit to the private sector slows. Entrepreneurship suffers. Growth momentum weakens.
The state becomes both the largest borrower and the safest borrower.
That is not a recipe for dynamic capitalism.
Oil and the Mirage of Future Relief
Much of the recent borrowing is justified under the banner of oil preparation. Roads, pipelines, industrial parks—all front-loaded on the assumption of future petroleum revenues.
There is logic in borrowing ahead of revenue streams. But logic requires realism.
Oil markets fluctuate. Transition pressures mount globally. Project timelines slip. Revenues can underperform projections.
If oil earnings arrive later or smaller than anticipated, debt servicing will not wait.
Fiscal space is a buffer against uncertainty. Uganda’s buffer is shrinking.
The Real Reform Agenda
So where does that leave us?
First, project readiness must precede loan signature—not follow it. No feasibility study, no borrowing. Full stop.
Second, supplementary budgets must return to their constitutional purpose—true emergencies. Not routine fiscal padding.
Third, tax policy must be rationalised. Generous exemptions erode the revenue base and force additional borrowing. We cannot borrow to replace revenue we voluntarily forgo.
Fourth, enforce the fiscal rules we set. The 50% debt-to-GDP ceiling and 12.5% debt service-to-revenue limit were not decorative clauses. They were guardrails.
Fifth, institutional accountability must be strengthened. Commitment fees on unused loans should trigger automatic review and consequences for responsible accounting officers.
Because here is the uncomfortable truth: paying Sh470 billion in penalties over six years for loans we did not use is not misfortune. It is preventable.
Final Reflection
Debt, used wisely, accelerates development. It builds infrastructure before savings accumulate organically. It smooths shocks. It bridges gaps.
But debt without discipline magnifies weakness.
Uganda’s domestic bond market reflects institutional progress. We have deepened capital markets. We have mobilised savings. We have reduced reliance on volatile external aid.
These are gains worth protecting.
Yet borrowing faster than we earn, breaching fiscal ceilings, expanding supplementary budgets, and paying dearly for idle loans erodes that progress.
We are not merely swimming in deeper waters than in 2004 when we raised Sh20 billion experimentally. We are swimming against a rising current of our own making.
Debt is not the villain. Indiscipline is.
And unless we confront the negligence embedded in our borrowing practices, the cost will not merely be fiscal.
It will be generational.
