Uganda’s public debt has soared to $32.24 billion, a significant increase largely due to preparations for the country’s first oil production, according to a government report released on Friday.
The Debt Sustainability Analysis Report for the 2024/25 financial year published by the Ministry of Finance, Planning and Economic Development revealed that total public debt jumped from US$25.59 billion in the 2023/24 financial year to US$32.24 billion by June 30, 2025, an increase of around 26%.
“The repayment of Bank of Uganda advances and increased development spending in the oil and gas sector, particularly in preparation for maiden oil, are the main causes of this increase in public debt,” the ministry said in its assessment.
Oil infrastructure drives borrowing surge
The East African country is accelerating infrastructure investment as it moves closer to joining the ranks of oil-producing nations. The government’s borrowing strategy focuses on financing critical projects needed to extract and transport oil, such as pipeline construction and processing facilities.
The debt-to-GDP ratio rose from 46.6% in June 2024 to 50.9% in June 2025, reflecting the scale of investment needed to set up the country’s nascent oil industry. According to the ministry’s projections, this ratio is expected to reach 55.5% by June 2026 and fall below the 50% threshold by the 2030/31 financial year.
Despite the rapid increase, Ugandan authorities maintain that borrowing remains within manageable limits. The ministry stressed that public debt is currently exposed to a moderate risk of a debt crisis and that medium- to long-term sustainability is assured.
Government outlines fiscal consolidation strategy
Treasury officials outlined a comprehensive approach to maintaining debt sustainability while pursuing ambitious development goals. The strategy includes four key pillars: strengthening domestic revenue mobilization, rationalizing expenditures, implementing the 10x growth initiative, and expected revenues from oil production once operations begin.
Confidence in the government’s fiscal trajectory rests largely on forecasts for oil revenues, which officials expect will provide significant fiscal support starting in the late 2020s. Uganda discovered commercially viable oil fields in the Albertine region in 2006, but development has progressed slowly due to infrastructure challenges and complex negotiations with international oil companies.
Treasury officials stressed that the increased borrowing is strategic and directly tied to income-producing assets. Unlike consumption-driven debt, these investments in oil infrastructure are expected to generate a revenue stream that will ultimately reduce dependence on external borrowing and strengthen the country’s financial base.
Regional economic conditions and international monitoring
Uganda’s rising debt levels mirror trends across East Africa, with several countries increasing borrowing to finance infrastructure projects aimed at improving economic competitiveness. However, the region faces increased scrutiny from international financial institutions concerned about debt sustainability.
The International Monetary Fund and the World Bank are urging African governments to carefully manage their debt accumulation while maintaining fiscal discipline. Uganda’s approach to linking increased borrowing to revenue-generating projects represents an attempt to balance development needs with financial prudence.
Government economists predict that once operations reach full capacity, oil production will generate about $2 billion to $3 billion a year, leading to significant budget cuts. The ministry’s report acknowledges that it is essential to closely monitor debt indicators during this transition period.
International credit rating agencies have noted Uganda’s rising debt burden, but differ in their assessments of the country’s ability to service its debt once oil revenues are realized. The government has sought to reassure investors that its borrowing strategy is consistent with realistic production schedules.
As Uganda approaches this historic economic milestone, the balance between investment-led growth and fiscal responsibility will determine whether the oil sector becomes a catalyst for prosperity or a source of fiscal burden. The next few months will be critical.
