TELECOM TITANS MTNU AND AIRTEL 2025 RESULTS COMPARISON

For most of the past two decades, Uganda’s telecom story has been framed as a rivalry between two companies: MTN Uganda and Airtel Uganda.

But the 2025 results released by the two operators reveal something much bigger than competition. They show how telecoms have quietly become one of the most powerful engines of Uganda’s modern economy — generating trillions in revenues, handling hundreds of trillions in digital payments, and increasingly acting as the financial plumbing of everyday commerce.

The numbers are staggering.

MTN Uganda reported revenue of Sh3.6 trillion, up 13.6%, with profit after tax of Sh678.8 billion.

Airtel Uganda, whose financials are reported in dollars, delivered profit before tax of roughly Sh2.3 trillion and profit after tax of about Sh1.6 trillion, when converted at Sh3,600 to the dollar.

Two companies. Multi-trillion-shilling businesses. And an industry that has evolved from selling voice minutes to powering the digital economy.

MTN: The Scale Champion

MTN remains Uganda’s telecom heavyweight.

With Sh3.6 trillion in revenue, the company sits among the largest corporate revenue generators in the country.

Its network scale is formidable:

• 24.2 million subscribers

• 12 million active data users

• 14.7 million fintech users

That scale translates into industry-leading profitability.

MTN’s EBITDA margin of 53.8% reflects a business that has reached operational maturity. Telecom economics at this stage resemble utilities: heavy upfront investment followed by long periods of strong, predictable cash flow.

In 2025 alone, the company invested about Sh843 billion expanding network capacity and improving service quality.

Airtel: The Profit Story

If MTN dominates scale, Airtel’s 2025 results tell a story of profit acceleration.

Converted into shillings, Airtel generated roughly:

• Sh2.3 trillion profit before tax

• Sh1.6 trillion profit after tax

That sharp jump in profitability suggests improved operational efficiency and a telecom market entering its cash-generation phase.

In the early years of Uganda’s telecom sector the focus was subscriber growth — building towers, expanding coverage and acquiring customers.

Now the industry has entered its second phase: monetisation.

The Real Engine: Fintech

Yet the most important similarity between the two companies lies in mobile money.

At MTN:

• Fintech revenue reached Sh1.1 trillion

• Transaction volumes hit 5 billion

• Transaction value reached Sh195.5 trillion

Those numbers illustrate how telecom networks have evolved into financial infrastructure.

Mobile money is now the nervous system of Uganda’s economy.

Salaries move through it. Bills are paid through it. Small traders rely on it for daily commerce.

Telecom companies are no longer simply communication networks.

They are digital financial ecosystems.

Data Is the New Voice

Another structural shift visible in the results is the rise of data.

MTN’s data revenue jumped 28.8% to Sh1 trillion, while voice grew just 1%.

The smartphone has replaced the voice call as the primary interface with telecom networks.

Consumers now rely on telecom infrastructure to stream video, transact online, run businesses and access government services.

In effect, telecom operators are evolving into digital platform companies.

A Quiet But Important Change for Investors

One of the most interesting announcements buried in the MTN results is a change in dividend policy.

Previously, MTN Uganda paid dividends three times a year — after the full-year, half-year and third-quarter results.

The company will now pay dividends quarterly.

That may sound like a minor administrative tweak, but for investors it is actually quite significant.

Quarterly dividends mean:

• more predictable cash flow

• shorter waiting periods for income

• stronger appeal for institutional investors

In effect, MTN is positioning itself more clearly as a high-yield telecom infrastructure stock.

What This Means for Investors

For investors on the Uganda Securities Exchange, the telecom sector remains one of the most compelling opportunities on the market.

At current closing prices — Sh472 for MTN Uganda and Sh112 for Airtel Uganda — the valuation picture becomes even more interesting.

Telecom Investment Comparison

Company	Price (UGX)	EPS (UGX)	P/E	PEG		Div Yield	ROIC	Rank (PEG)
MTN Uganda	472	30	15.7	0.69		6.1%	32%	2
Airtel Uganda	112	40	2.8	0.14		7.0%	28%	1

The PEG ratio — price relative to growth — is often one of the most revealing valuation metrics.

A PEG below 1 typically suggests undervaluation relative to growth potential.

By that measure, Airtel Uganda ranks first, suggesting that the market may be significantly underpricing its growth prospects.

MTN Uganda ranks second but remains the higher-quality dividend stock, reflecting its market leadership and stronger fintech ecosystem.

Investment Strategy

For long-term investors, the telecom sector offers two complementary opportunities.

MTN Uganda – Dividend Stability

MTN paid Sh28.75 per share in dividends in 2025, distributing about Sh643.7 billion to shareholders.

With a payout ratio above 75%, the company behaves like a high-yield telecom utility.

The shift to quarterly dividends further strengthens its appeal to investors seeking steady income.

Airtel Uganda – Value and Growth

Airtel’s extremely low valuation relative to earnings growth makes it one of the most interesting value opportunities on the exchange.

If its profit trajectory continues, the current price may eventually look like a bargain.

The Bigger Story

The rivalry between MTN and Airtel may dominate headlines, but the deeper story is structural.

Telecom networks have become the digital backbone of Uganda’s economy.

They connect businesses, enable payments, and power digital commerce.

And as the country continues to digitise, telecom companies will likely remain among the most powerful wealth-creation vehicles on the Uganda Securities Exchange.

For investors, the lesson is simple.

Owning a slice of the network may prove one of the smartest investments of the coming decade.

UGANDA BUDGET 2026/27 IGNORES DOMESTIC ARREARS --AGAIN

These days Hajji curses the day his friend Jack walked into his workshop with what looked like the deal of a lifetime.

Jack had a contact in a government agency that needed thousands of desks and chairs for public schools. The Local Purchase Order(LPO) carried the authority of the state. The volumes were large. The opportunity seemed obvious.

Supply the furniture. Deliver the desks. Get paid.

What Hajji did not know then was that he had just stepped into one of the most dangerous transactions in Uganda’s economy: supplying government.

The banks had already learnt the lesson the hard way. They no longer discount government LPOs. Too many suppliers had walked into branches with official paperwork only to discover that payment might take years.

So Hajji financed the contract himself.

He drained his savings, borrowed from friends, sold part of his inventory and rolled the rest through expensive overdrafts. By the time the desks were delivered, he had sunk hundreds of millions of shillings of his own money into the deal.

That was five years ago.

He is still waiting to be paid.

His workshop is barely surviving. Expansion plans have been shelved. Machinery upgrades postponed. The only way he has kept the doors open is by shrinking the business — cutting staff, closing one production line and focusing on private clients who actually pay their bills.

Hajji’s story is not unusual. It is simply the human face of one of the least discussed problems in Uganda’s public finances.

Buried deep in the recently released Medium-Term Expenditure Framework (MTEF) for 2026/27 is a number that should worry anyone interested in the health of the economy.

"The government plans to allocate about Shs200 billion to clear domestic arrears estimated at roughly Shs8.4 trillion...

If you owed your suppliers Shs8.4 trillion and planned to repay them Shs200 billion a year, it would take more than 40 years to clear the bill — assuming you stopped accumulating new arrears tomorrow.

That assumption is heroic.

Domestic arrears are one of the most persistent structural weaknesses in Uganda’s fiscal system. Every year contractors build roads, firms supply medicines, manufacturers deliver furniture like Hajji’s desks, and small traders supply food to schools, hospitals and barracks.

But a significant share of those bills is not paid on time.

Instead they accumulate quietly in ministry ledgers until they become arrears — unpaid obligations sitting on government’s balance sheet like sediment at the bottom of a river.

And the problem has been building for more than a decade. Ten years ago domestic arrears were estimated at roughly Shs2 trillion. By 2018 they had crossed Shs3 trillion, prompting repeated directives from the Ministry of Finance warning accounting officers not to commit expenditure without cash backing. Yet the numbers kept rising. By the early 2020s the stock had climbed to around Shs5 trillion.

Today the figure stands at about Shs8.4 trillion — roughly four times what it was a decade ago.

In effect, government has allowed arrears to grow faster than the economy itself...

The Budget Framework Paper acknowledges the scale of the problem and outlines a multi-year strategy to eliminate the stock, even allocating Shs1.4 trillion this financial year toward the effort.

Yet the Medium-Term Expenditure Framework that follows suggests the effort quickly reverts to a token Shs200 billion annually.

In fiscal terms, that is not a strategy. It is an accounting gesture.

To understand why domestic arrears matter, think of them as the government’s hidden tax on the private sector.

When government fails to pay suppliers on time, those suppliers must finance the gap themselves. They borrow from banks, delay paying workers and suppliers, or scale back investment.

A contractor waiting years to be paid for a project is effectively extending a loan to the state — except the interest rate is whatever his bank charges him.

In Uganda’s case, that rate easily sits between 18 and 22 percent.

At the current arrears stock of Shs8.4 trillion, the business community is effectively financing the government to the tune of roughly Shs1.5–1.7 trillion every year in interest costs alone. And because arrears are not cleared on a strict first-in-first-out basis, some suppliers wait far longer than others, pushing their financing costs even higher...

So what begins as a government cash-flow problem quickly becomes a private sector solvency problem.

You can see the consequences across the economy.

Banks complain about non-performing loans from contractors whose payments have stalled. Businesses become reluctant to bid for government contracts unless they price in the risk of delayed payment. Smaller firms simply avoid government tenders altogether.

The result is predictable: higher project costs, weaker competition and slower growth.

And yet the irony is striking.

At the same time government struggles to pay suppliers like Hajji, it continues to borrow aggressively on the domestic bond market.

Interest payments next year are projected to reach about Shs12.7 trillion, with more than Shs10 trillion going to domestic creditors.

Put differently, Uganda will spend many times more servicing interest than clearing arrears.

That tells you something about our fiscal priorities.

We pay the bond market religiously. We pay suppliers when we can.

And this creates a dangerous incentive.

If government bonds offer 15–16 percent risk-free returns while productive businesses struggle with unpaid invoices and borrowing costs above 20 percent, what stops genuine producers from abandoning expansion altogether?

Why struggle with factories, machinery and payrolls when the state itself is offering double-digit returns for simply buying its paper?

"The risk is that capital slowly migrates from production to speculation...

Which brings us back to Hajji and his desks.

For him, the cost of supplying government was not just delayed payment. It was the freezing of capital, the shrinking of a business and the quiet death of expansion plans.

Multiply that story across thousands of suppliers and you begin to see the real economic cost of domestic arrears.

Until government pays its bills, the talk of private-sector-led growth will remain just that — talk.

KAMPALA'S PROPERTY MARKET: BUBBLE IN THE HILLS, BOOM IN THE WAREHOUSES

Every few years Kampala’s skyline provokes the same uneasy question.

Are we building too much?

A recently released Kampala Property Market Performance Review for the second half of 2025 by Knight Frank Uganda provides a useful starting point for thinking about that question. The report reads less like a warning of a looming collapse and more like a snapshot of a market that is beginning to diverge.

"Look closely and three very different stories are unfolding beneath Kampala’s real estate boom.

The first is a cooling residential market.
The second is a roaring industrial sector.
And the third is a quiet migration of business activity away from the traditional city centre...

Each raises deeper questions about where Kampala’s property market is heading.

Start with the hills.

For two decades Kampala’s prime residential market ran on a very simple engine: expatriate rents.

Developers built apartments in Kololo, Nakasero, Naguru and Mbuya because NGOs, diplomatic missions and international consultants were willing to pay dollar-denominated rents that justified the investment.

That model is now wobbling.

Knight Frank’s latest market review shows rental rates for two- and three-bedroom apartments in these prime areas falling by roughly 9 to 10 percent over the past year. It is not a crash. But it is the first meaningful correction the market has seen in years.

More telling is what lies beneath the numbers.

Supply is rising. Demand is shifting. And marketing periods for properties are getting longer. Some developers are quietly discounting prices. Others are simply waiting for better days.

At the same time, distressed property listings are beginning to appear—never a good sign in any asset market.

Yet the buyers that remain are not the ones developers originally built for.

Increasingly, it is Ugandan investors snapping up smaller apartments priced between about $80,000 and $170,000. The logic is simple: buy, furnish and list the property on the short-let market for diaspora visitors and business travellers.

That shift—from expatriate tenants to investor buyers—is the kind of transition that has preceded property bubbles in other cities.

But Kampala may not be there yet.

What we may be seeing instead is something more mundane: a market adjusting to the slow replacement of expatriate demand with domestic wealth.

Uganda’s middle and upper classes are growing. Many are now able to buy into neighbourhoods that once belonged almost exclusively to diplomats.

Prices may soften. But the long-term demand story is still intact.

Now leave the hills and head for the warehouses.

If residential real estate is cooling, industrial property is having a moment.

"Knight Frank’s report shows occupancy rates across Kampala’s industrial corridors remaining above 80 percent and warehouse rents holding firm between about $3 and $7 per square metre...

Three forces are powering this demand.

The first is coffee.

Uganda exported about 8.4 million bags last year earning roughly $2.4 billion and overtaking Ethiopia as Africa’s largest coffee exporter. Coffee exporters now require modern storage facilities—large warehouses with ventilation, security and climate control.

The second is logistics.

As Uganda’s consumer economy grows, distribution companies and FMCG manufacturers increasingly require storage space close to Kampala’s transport corridors.

The third force—still largely anticipatory—is oil.

With commercial production expected to begin around 2026 and the East African Crude Oil Pipeline nearing completion, contractors and support companies are already securing space for logistics yards and equipment storage.

Industrial real estate is therefore benefiting from a rare alignment of economic forces: exports, consumption and energy.

The question, of course, is whether the boom will last.

Oil timelines have slipped before. Infrastructure delays are common. And once the initial construction frenzy ends, demand for some logistics facilities may ease.

But unlike residential property, industrial real estate is anchored in productive activity rather than speculation.

Warehouses are built because goods need to move.

That is usually a healthier foundation for a property market.

The third transformation is perhaps the most subtle but also the most permanent.

Kampala’s centre of gravity is shifting.

For decades the city revolved around the CBD—Kampala Road, Nakasero and the immediate surroundings. Offices clustered there. Retail followed. And traffic, predictably, followed both.

But businesses are quietly voting with their feet.

Knight Frank notes that office tenants increasingly prefer suburban locations such as Ntinda, Bukoto, Naguru and Nakawa where parking is easier and congestion is less punishing.

Retail is following the same path.

Neighbourhood malls are replacing roadside shops across emerging suburbs. International brands—from KFC to Java House—are expanding along major commuter corridors rather than squeezing into the already crowded city centre.

Even fuel stations are becoming mini retail hubs with supermarkets, pharmacies and restaurants built into their forecourts.

"This is not the decline of the CBD.

It is simply the decentralisation of Kampala...

As cities grow, economic activity spreads outward into multiple nodes rather than concentrating in a single downtown district. Nairobi went through this transition years ago when Westlands, Upper Hill and Kilimani emerged as alternative business centres.

Kampala appears to be following the same trajectory.

And so the real story of Kampala’s property market today is not one of uniform boom or impending bust.

It is one of divergence.

Residential property is adjusting to new patterns of demand. Industrial property is riding the wave of exports and the oil economy. And commercial activity is gradually redistributing itself across a wider metropolitan footprint.

Markets, like cities, rarely move in straight lines.

But if Kampala’s cranes seem unusually busy today, it may be because the city is not simply growing.

It is rearranging itself.

THE RWENZORI MARATHON: THE ALCHEMY OF WEALTH CREATION

Last week, the Rwenzori Marathon slated for August 22 was launched.

Since the last edition, the race has earned World Athletics Label status — placing it on the same calendar as the New York City Marathon and the London Marathon. It is now one of only three races on the African continent with such recognition. Government has pledged $1 million to boost international promotion and enhance the runner experience.

Pause there.

A quirky run at the foot of the Rwenzori Mountains four years ago is today a globally accredited sporting asset attracting public capital.

That is not just a sporting milestone.

It is wealth alchemy.

At the centre of this transformation is Amos Wekesa, who has parlayed decades of experience in Uganda’s tourism sector into building a race that now sits on the world’s athletics calendar. This did not happen because Kasese suddenly became more beautiful. The mountains were always there — snow-capped, dramatic, storied as the “Mountains of the Moon.”

But scenery does not generate GDP. It must be structured.

That is the first principle of enterprise building: endowment is not enterprise.

Uganda is richly endowed — rivers, mountains, waterfalls, wildlife, sunshine and soil. Yet we often admire what we have rather than price it intelligently. We photograph beauty without converting it into revenue.

The Rwenzori Marathon changes that equation.

It packages geography into product. Runners cross the equator. They traverse breathtaking scenery. They finish amid culture and celebration. Landscape becomes experience. Experience becomes income.

In financial terms, World Athletics Label status is equivalent to a credit rating upgrade. It signals compliance with global standards — route integrity, anti-doping compliance, safety systems and operational discipline. Credibility reduces risk. Reduced risk attracts participants. Participants attract sponsors. Sponsors attract capital.

The government’s $1 million pledge is therefore not charity.

It is leverage. Public capital is following proven execution. But look deeper.

A marathon is not an entry-fee business.

Every runner books accommodation. Every visitor hires transport. Every photograph markets Uganda globally.

Hotels in Kasese fill. Tour operators bundle safari extensions. Vendors sell food and crafts. The event becomes an economic node. Value multiplies beyond the starting line.

This is ecosystem thinking — a tourism mindset applied to sport. You sell the experience, not just the ticket.

Wekesa understands this instinctively because tourism has always been about multiplying value along a chain

: flight, lodge, tour, experience, merchandise. The marathon simply grafts that model onto athletics.

Now widen the lens.

Uganda boasts extraordinary natural endowments: the Source of the Nile, the volcanic slopes of Mount Elgon, the thundering spectacle of Murchison Falls.

These are not just postcard attractions. They are dormant balance sheet assets. With disciplined strategy, each could anchor a globally competitive experience — endurance races, eco-summits, ultra-trails, conservation festivals — professionally packaged, internationally accredited, deliberately scaled.

The constraint is not nature.

It is mindset.

Too often, we speak of “potential” as if it were an achievement. Potential is merely unmonetised capacity. Wealth is created when someone does the hard work of structuring, certifying, marketing and scaling that capacity.

When properly structured, ventures of this nature create tangible local value:

Jobs in hospitality, logistics and security. Small businesses along supply chains. Increased tax revenues.
Infrastructure improvements justified by demand.

Tourism-led enterprise has a multiplier effect that manufacturing in a small economy often struggles to replicate quickly. It distributes income geographically and stimulates ancillary investment.

The Rwenzori Marathon also teaches patience.

It did not chase bloated numbers in year one. It built credibility incrementally. Hydration stations worked. Timing systems improved. Each year refined the runner experience.

Reputation compounded quietly until accreditation followed.

In finance, we understand compound interest. In enterprise building, we must learn to appreciate compound credibility.

Four years in, the marathon is transitioning from event to institution.

And institutions are powerful things.

Institutions reduce risk. Reduced risk attracts capital. Capital enables reinvestment.
Reinvestment strengthens institutions. That is how value compounds beyond personalities and outlives founders.

For Uganda to move forward, we need more practitioners of this alchemy.

Not more admirers of endowment. Not more speeches about potential. More builders who look at a river, a mountain or a waterfall and see a structured revenue stream.

Wekesa’s contribution is not merely organising a race. It is demonstrating a template: identify undervalued assets, apply sector expertise, build credibility patiently, monetise the ecosystem and anchor to global standards.

The mountains did not change.

What changed was how someone chose to see them — not as backdrop, but as balance sheet.

Uganda’s progress will not come from discovering new rivers or taller mountains. It will come from more citizens practicing the disciplined art of turning what we already have into globally competitive institutions.

The Rwenzori Marathon is only four years old. Yet it already shows what is possible when entrepreneurial imagination meets natural endowment.

That is the kind of wealth creation we require.

Not once a year in Kasese.

But every day, across the country.

AIRTEL UGANDA CROSSES SH2TRILLION

There is something psychologically powerful about crossing a trillion-shilling mark. It signals scale. It signals system relevance. It signals that you are no longer just a company — you are infrastructure.

Last week, Airtel Uganda reported revenues of Sh2.25 trillion for the year ended December 2025 — the first time it has decisively crossed the Sh2 trillion threshold . That is not just growth. It is altitude.

Top-line revenues grew 13.3%. But the more telling number is further down the income statement: Profit After Tax jumped 41% to Sh446.9 billion, up from Sh316.7 billion the previous year

. Earnings per share climbed to Sh11.2 from Sh7.9 .

In plain language: Airtel is converting growth into real money.

For years, the telecom story in Uganda was framed as a subscriber war — SIM card growth, promotions, price competition. Margins were thin, spectrum costs heavy, capital expenditure relentless. Yet what these results suggest is something deeper: the business model has matured.

Data is no longer an emerging revenue stream — it is the core engine. Data and value-added services delivered Sh1.176 trillion, up from Sh961 billion . Voice revenue, often prematurely declared dead, held firm at over Sh1 trillion . Meanwhile, the total customer base expanded by 19.2% .

But the most impressive development is operating leverage.

Operating profit rose 35% to Sh849 billion, with margins at 37.7% . When profits grow faster than revenues, it signals pricing discipline, cost management, and asset efficiency. Airtel added 258 network sites during the year , but incremental revenue is now falling more efficiently to the bottom line.

Cash generation tells the same story. Net operating cash flow crossed Sh1 trillion . That is not just accounting profit — it is liquidity muscle. Even after paying out Sh404 billion in dividends , leverage remains manageable at 1.5x EBITDA .

When Airtel listed, sceptics questioned whether Uganda could sustain two large telecom operators with heavy spectrum obligations and expanding infrastructure costs. The fear was structural margin compression. Instead, scale is now working in favour of the operator. Customer growth is translating into monetisation, not just traffic.

Crossing Sh2 trillion in revenues does not just place Airtel in an elite corporate bracket — it confirms telecom’s transformation from growth gamble to cash-generating utility. The pattern is clear: expanding digital usage, improving margins, rising dividends.

For investors, this is no longer a speculative telecom play. It is a core portfolio counter anchored on scale, profitability and cash.

In Uganda’s evolving corporate landscape, that combination is rare.

---

Airtel Uganda – Key Financial Results

Metric	2025	2024	% Change
Revenue (Shs bn)	2,249.7	1,986.5	+13.3%
Operating Profit (Shs bn)	849.2	629.1	+35%
Profit Before Tax (Shs bn)	639.9	451.7	+42%
Profit After Tax (Shs bn)	446.9	316.7	+41%
EPS (Shs)	11.2	7.9	+42%
Net Operating Cash Flow (Shs bn)	1,013.4	880.0	+15%
Dividends Paid (Shs bn)	404.0	301.0	+34%

INNEFFICIENT DEBT UTILISATION, NOT THE DEBT, SHOULD WORRY UGANDA

More than 20 years ago, I interviewed the late Secretary to the Treasury, Emmanuel Tumusiime-Mutebile. He told me government would soon begin issuing bonds to support the budget. At the time, it felt almost unnecessary. Why borrow locally at higher rates?

Mutebile himself wondered aloud in a follow-up interview: why hurry to the bond market when the World Bank would lend more cheaply?

Yet in January 2004, government issued a two-year bond to raise Shs20 billion. It was modest — a dipped toe in the water. Before that, Uganda had already been issuing shorter-term Treasury bills, mainly to mop up excess liquidity and keep inflation in check. Treasury bills were about monetary stability. Bonds were something different: they were about fiscal financing through domestic resource mobilisation.

That distinction marked the beginning of a structural shift.

Fast forward two decades and the contrast is almost surreal. Last week alone, government raised roughly Shs990 billion in a single bond auction. Over the course of a year, Uganda now raises multiples of the Shs2.6 trillion equivalent it received in external support in 2004 — but this time from its own domestic bond market.

What was once an experiment has become an anchor.

In the 2024/25 financial year, domestic debt overtook external borrowing for the first time, accounting for just over 52 percent of total public debt. Uganda’s overall debt stock now stands at about $32 billion (Shs113.9 trillion), with domestic debt at roughly Shs59.3 trillion.

In many respects, this is financial maturity. Countries serious about development must mobilise their own savings. They cannot rely indefinitely on concessional capital. A functioning bond market deepens the financial system, builds benchmark yield curves and reduces exposure to exchange-rate volatility. Domestic resource mobilisation is not optional; it is foundational.

But mobilisation without discipline becomes overreach.

Domestic borrowing may shield us from foreign-exchange swings, but it is not cheap. Interest rates on government securities hover around nine percent. Debt service already consumes roughly 35 percent of domestic revenue and could rise further next year. For every Shs100 URA collects, about Shs35 goes to creditors...

That is manageable — if debt builds productive capacity.

Debt is a tool. Borrowing to build roads that reduce transport costs, power plants that energise industry, irrigation schemes that stabilise agriculture, and schools that build human capital increases the economy’s ability to repay. Investment-driven debt strengthens the future tax base.

Borrowing to finance recurrent consumption does not.

Even where borrowing is directed toward infrastructure, our execution record undermines value. Uganda’s project cycles are unnecessarily long. Delays caused by procurement disputes, weak oversight, corruption and lack of timely counterpart funding stretch timelines and inflate costs. Interest accrues while projects stall. Returns diminish.

Time is expensive when you are paying interest.

A highway completed efficiently is an economic catalyst. The same highway delivered years late at inflated cost becomes a fiscal strain. In that sense, inefficiency quietly converts productive debt into burdensome liability.

Heavy domestic borrowing also raises the risk of crowding out. When government raises nearly a trillion shillings in a month, commercial banks and institutional investors understandably prioritise Treasury securities. Credit to SMEs tightens. Yet it is private-sector growth that ultimately generates the tax revenue required to service debt sustainably.

Then there is oil.

First oil revenues are projected in the 2026/27 financial year. Officially, these revenues are expected to ease fiscal pressure and strengthen reserves. But expectation can breed moral hazard. There is a subtle temptation to borrow more comfortably today because future petroleum receipts are on the horizon.

History cautions against such optimism. Nigeria once assumed oil would guarantee prosperity; it experienced repeated fiscal volatility. Angola believed petroleum wealth would anchor transformation; governance weaknesses endured. The oil curse is not a myth. It emerges when resource expectations weaken discipline.

Oil revenues, if managed prudently, should retire expensive debt, build buffers and finance productivity-enhancing investments. They should not justify fiscal complacency.

The irony is striking. In 2004, Uganda relied heavily on $1.41 billion in external assistance and cautiously raised Shs20 billion domestically. Today, we raise multiples of that old aid envelope annually from our own bond market.

That is institutional growth.

But scale magnifies responsibility.

The journey from Shs20 billion in 2004 to Shs990 billion in a single auction is more than a story of market development. It is a test of fiscal character. Domestic resource mobilisation must be matched by efficient allocation. Projects must be delivered on time and on budget. Revenue mobilisation must improve. Expenditure must be disciplined.

Oil will not rescue weak execution. Bonds will not compensate for poor prioritisation.

Twenty years ago, we dipped a toe in the bond market. Today, we are swimming in it.

The question is not whether Uganda can mobilise domestic capital. It clearly can.

The question is whether we will use that capital to finance transformation — or simply accumulate obligations in the hope that tomorrow’s oil will pay yesterday’s bills.

CRIMINAL NEGLIGENCE: UGANDA PAYING FOR LOANS IT DOESN'T USE

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.