Uganda is aiming for a major macroeconomic shift, with its central bank projecting that the national fiscal deficit will decrease to 3% of Gross Domestic Product (GDP) by the 2030/31 financial year. This target marks a significant reduction from the current deficit of 6% and is supported by a new debt management strategy intended to prioritize more affordable external credit over costlier domestic borrowing.
While the outlook for fiscal consolidation is positive, the central bank’s report notes that Uganda’s public debt is currently assessed at a “moderate” risk level. Officials cautioned that this assessment is tempered by underlying vulnerabilities, specifically rising debt service costs and limited capacity for the economy to absorb potential shocks.
According to the finance ministry, the nation’s total public debt stock rose by 8% to $34.9 billion during the second half of last year, a trend largely driven by the increased issuance of domestic debt.
To address these challenges, the finance ministry published a new debt management strategy in March. This policy framework is designed to rebalance the country’s debt portfolio by seeking to increase external borrowing while simultaneously trimming expensive domestic credit, a move intended to help the government reduce the pressure of rising interest payments.
Despite concerns regarding debt, Uganda’s broader economic performance has shown strong momentum. The central bank reported that GDP growth reached 8.5% in the second quarter of the 2025/26 fiscal year, a significant jump from the 5.3% growth recorded in the same period the previous year.
This expansion has been bolstered by robust performance in exports and agricultural production, as well as significant investments related to the oil sector.
The government’s dual approach of pursuing a more sustainable debt strategy while capitalizing on strong economic growth sectors is central to its medium-term financial planning. By shifting the structure of its debt and leveraging current economic gains, Uganda aims to create greater fiscal space and long-term stability for the coming years.
