Uganda expects to reduce its fiscal deficit to 3% of GDP by the 2030/31 financial year, down from 6% this year, as the government moves to rely more on lower-cost external financing to reduce debt-servicing costs.
The strategy follows a new debt management plan introduced in March, which seeks to reduce dependence on costly domestic borrowing while expanding access to concessional foreign loans.
Despite the shift, the Bank of Uganda says the country’s public debt remains at a moderate risk of distress, warning that rising debt-servicing obligations and limited capacity to absorb economic shocks continue to present challenges.
According to the Ministry of Finance, Uganda’s public debt increased by 8% to $34.9 billion during the second half of last year, largely driven by increased domestic borrowing.
However, the country’s economic outlook remains positive. The central bank said the economy expanded by 8.5% in the second quarter of the 2025/26 fiscal year, up from 5.3% during the same period a year earlier.
The strong performance was attributed to increased investment in the oil sector, stronger export earnings, and improved agricultural production, signaling continued economic momentum despite fiscal pressures.
