Uganda Sovereign Debt Market Overview - December 2025

A pivot toward domestic markets and the fiscal preparations for upcoming oil production.

📌 Executive Snapshot

• Total Public Debt: UGX 116.2 trillion (~USD 32.3 billion) as of June 2025.

• Debt-to-GDP Ratio: 51.3% (surpassing the 50% threshold, though lower in present value terms).

• Debt Composition: ~52% Domestic | ~48% External.

• Outlook: Uganda is at a fiscal crossroads. While debt levels have surged due to infrastructure spending, the start of oil production (projected late 2026) and a resumption of World Bank funding offer a path to de-leveraging. The immediate concern is the rising cost of domestic debt servicing.

🔍 1. Debt Market Structure

1.1 Total Public Debt Profile

• Domestic Debt: UGX 60.3 trillion (A sharp 49% YoY increase).

• External Debt: UGX 55.9 trillion (~USD 15.5 billion).

• Debt Service-to-Revenue Ratio: ~25%–32%. For every UGX 100 collected in tax, nearly UGX 30 now goes to interest and principal repayments.

• Source: Ministry of Finance, Planning and Economic Development (MoFPED) 2025 Reports.

1.2 Legal & Institutional Framework

• Governance: The Directorate of Debt and Cash Policy under MoFPED.

• Monetary Authority: The Bank of Uganda (BoU) manages the issuance of government securities.

• Strategic Shift: The government has signaled a move to reduce external commercial borrowing in 2025/26 to mitigate FX risks and manage the “debt pile.”

🏦 2. Domestic Debt Instruments

InstrumentCurrencyMaturityFrequency2025 Yield TrendsTreasury BillsUGX91, 182, 364 daysBi-weeklyDownward: 364-day yields dropped toward ~12.5% from 2024 peaks.Treasury BondsUGX2, 3, 5, 10, 15, 20 yearsMonthlyStable: Long-term yields (15–20 yrs) remain attractive at ~15%–16%.

• Retail Access: Unlike Kenya’s DhowCSD, Uganda’s retail participation is growing but remains bank-heavy. However, the BoU has improved the Central Securities Depository (CSD) to facilitate easier secondary market transfers.

• Primary Dealer System: A limited number of commercial banks act as Primary Dealers, providing liquidity to the secondary market.

🌍 3. External Sovereign Debt

• Multilateral (66%): The backbone of external debt. The World Bank (IDA) is the largest creditor (USD 5.3B), followed by the AfDB and IMF.

• Bilateral (23%): Dominated by the Exim Bank of China (70% of bilateral debt), primarily funding the Entebbe Express Highway and Karuma/Isimba hydropower projects.

• Commercial (11%): Standard Bank and AFREXIM are the primary commercial lenders. Uganda has historically avoided Eurobonds, preferring concessional or semi-concessional debt.

👥 4. Investor Base

• Domestic: Dominated by Commercial Banks and the National Social Security Fund (NSSF). The NSSF is a massive player, often acting as a price setter for long-term bonds.

• Foreign Investors: Interest is cautiously returning as the Shilling (UGX) shows resilience and FX reserves hit an all-time high of USD 5.4 billion in late 2025.

📊 5. Recent Trends & 2025 Outlook

• The “Domestic Tilt”: In 2024/25, domestic borrowing grew by over 50% while external borrowing grew by only 6%. This was a deliberate move to reduce foreign currency exposure but has “crowded out” private sector lending.

• The Oil Factor: Economic growth is projected to jump from 6% to over 7.5% in 2026/27 as oil exports via the EACOP pipeline begin. This is the primary “bull case” for Uganda’s debt sustainability.

• Resumption of Aid: The World Bank’s October 2025 decision to resume project lending (after a pause over the Anti-Homosexuality Act) has injected fresh liquidity into the infrastructure budget.

⚠️ 6. Risk Assessment

• Refinancing Risk: Domestic debt is increasingly skewed toward short-term maturities, requiring constant “roll-overs.”

• Concentration Risk: Heavy reliance on the banking sector and NSSF to absorb local debt.

• Political Risk: The upcoming January 2026 General Election may introduce fiscal slippage as government spending typically increases during election cycles.

✅ 7. Opportunities & Reforms

• Deepen the Bond Market: Moving beyond the current primary dealer system to a more automated, retail-friendly secondary market.

• ESG & Oil: Balancing the environmental concerns of oil production with the potential for Green Bonds to fund renewable energy and reforestation.

• Capital Market Integration: Harmonizing bond settlement systems within the East African Community (EAC) to allow cross-border trading.

📎 8. Annexes & Ratings

Current Credit Ratings (Updated Q4 2025):

• S&P: B- (Positive) — Outlook revised from Stable in Nov 2025 due to oil prospects.

• Moody’s: B3 (Stable).

• Fitch: B- (Stable).

Resources:

• Bank of Uganda - Securities Auctions

• Uganda Ministry of Finance - Debt Reports

📬 For Investors & Researchers

Uganda presents a “yield-play” opportunity. While debt levels have crossed the 50% mark, the impending oil revenue windfall acts as a significant safety net. The current high domestic yields offer a window of opportunity before the expected rate easing in 2026.