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Uganda’s fiscal priorities are once again under scrutiny after the Ministry of Finance revealed that Shs17.18 trillion has been released for government spending in the first quarter of the 2025/26 financial year — with Shs6 trillion, or more than one-third, allocated to debt servicing and treasury operations.
The disclosure has sparked mixed reactions among economists, some warning that the country’s growing focus on debt repayments is edging out investment in critical growth sectors.
“It’s not wrong to borrow,” said Geoffrey Ekanya, an economist and former legislator. “But what matters is how we use the borrowed money. If it’s not being injected into productive sectors like infrastructure, manufacturing, or agro-processing, then we’re simply paying interest and commitment fees without seeing returns. That’s not sustainable.”
Uganda’s approved national budget for FY2025/26 stands at Shs72.38 trillion, meaning the government still has over Shs55.2 trillion to spend in the remaining three quarters. However, the structure of the Q1 release has raised concern that spending on recurrent obligations — especially debt — continues to crowd out development priorities.
While economists acknowledge the importance of honoring debt obligations to maintain Uganda’s creditworthiness and access to international financing, they stress that the sustainability of such debt hinges on whether the borrowed funds fuel economic growth.
“There’s nothing inherently wrong with servicing debt,” said a Kampala-based macroeconomist.
“But if we’re servicing loans that haven’t translated into improved productivity or infrastructure, we’re just recycling liabilities without lifting the economy.”
Uganda’s debt has steadily risen over the past decade, driven by ambitious infrastructure projects, pandemic-related borrowing, and widening budget deficits.
Yet critics say the return on investment from this borrowing remains patchy — with delays, cost overruns, and underutilisation plaguing key projects.
Infrastructure development, manufacturing, and agro-industrialisation are repeatedly cited in government plans as priority areas for economic transformation. But analysts argue that unless execution improves, the impact of the budget will remain muted.
“Allocating money is one thing. Getting it to the projects and ensuring value for money is another,” one analyst said.
“If absorption remains low and we keep borrowing for non-productive uses, then we’re feeding a debt cycle that yields very little in return.”
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The Ministry of Finance has not issued a detailed breakdown of which loans are being serviced in Q1, but previous reports have shown an increasing share of external debt owed to commercial lenders and Chinese financing institutions — both of which carry relatively higher interest rates and shorter repayment periods.
As the fiscal year progresses, economists say the focus must shift toward ensuring that the remaining budget is channelled into sectors with the highest multiplier effects, particularly agriculture, energy, roads, and industrial development.
“There’s still Shs55 trillion to work with,” Ekanya noted. “That money must go where it creates jobs, boosts exports, and builds resilience. Otherwise, we’re just running the economy on autopilot — with lenders in the pilot seat.”
The Ministry is expected to release the second quarter cash limits by mid-October, by which time Parliament and civil society will likely intensify scrutiny of spending trends and the overall direction of Uganda’s fiscal policy.
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