Price WaterhouseCoopers (PwC) says that whereas Uganda’s public debt remains sustainable, the rising growth in debt service costs presents challenges that are pushing the country into a debt distress position.

In its August 2024 economic outlook, PwC noted that “the debt outlook continues to be faced with risks of distress, with the major vulnerabilities relating to slow growth of exports and increasing debt service burden on revenues”.

The outlook, produced by the PwC country senior partner Uthman Mayanja and staff, indicates that debt service costs excluding domestic redemptions are projected to take up 40.3 percent of domestic revenue in 2025, up from 33.4 percent in 2024, which may continue to grow in the medium term, due to high interest rates as well as increasing cost of external debt as global financing conditions remain tight.

However, under the 2024/28 Medium Term Debt Management Strategy, government has committed to manage borrowing costs and risks by balancing domestic and external borrowing, with at least 60 percent of debt sourced domestically and prioritising concessionary borrowing.

“Heavier reliance on private borrowing raises concerns around associated interest costs ... since part of borrowings go to funding non-productive sectors and, therefore, do not, of themselves, generate foreign exchange to support debt repayments. This is expected to place a burden on taxpayers to meet shortfalls without contributing to the growth of taxable incomes,” PwC said.

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