Uganda has announced plans to borrow €500 million (roughly $568 million) from a group of international lenders to finance infrastructure development, according to Finance Minister Matia Kasaija. The funding will be used to support key projects aimed at enhancing the country’s transportation, energy, and public works sectors.
The loan package, approved by Uganda’s parliament on Thursday, comes despite strong objections from opposition legislators. Critics warned that the new borrowing would further strain the nation’s already swelling debt obligations. However, the government defended the move, arguing that infrastructure investment is essential for long-term economic growth.
Of the total amount, €270 million is set to be borrowed from the Cairo-based African Export-Import Bank (Afreximbank), a multilateral financial institution focused on promoting intra- and extra-African trade. The remaining €230 million will be provided through a joint arrangement between Ecobank Uganda and the Development Bank of Southern Africa. Minister Kasaija, while addressing parliament, did not offer specific details on when the loans would be disbursed or the timeline for implementation of the funded projects.
Debt Levels Continue to Climb
Uganda’s rising public debt remains a growing concern. According to data from the Ministry of Finance, the country’s total debt stock surged by 18% last year, reaching $29.1 billion. The increase was largely attributed to domestic borrowing as the government sought to meet financing needs amid economic recovery efforts.
This rapid accumulation of debt has had consequences. Uganda faced a credit rating downgrade last year, reflecting heightened risks tied to its debt sustainability. The downgrade has made it more expensive for the country to access future credit and could undermine investor confidence.
Despite previous commitments to reduce external borrowing by 98%, government officials now argue that additional financing is necessary to maintain momentum in economic development. They claim that the borrowed funds are being directed toward productive sectors that will generate returns and improve the country’s long-term fiscal position.
Global Warnings on Debt Risks
Uganda’s borrowing plans come at a time when global financial institutions are raising red flags over the rising debt burdens in low- and middle-income countries. The World Bank’s International Debt Report, released last year, warned that elevated interest rates combined with unprecedented debt levels are pushing many developing nations toward financial distress.
The report underscored the difficult choices governments face: continuing to service debt obligations or investing in critical sectors such as public health, education, and infrastructure. It emphasized that each quarter of sustained high interest rates intensifies the pressure on national budgets, especially for economies with limited fiscal space.
In Uganda’s case, the debate continues over whether the current borrowing strategy is sustainable. While the government insists the loans are being used prudently, critics remain skeptical, citing the long-term implications of accumulating more debt in a challenging global financial environment.
As Uganda pushes ahead with its infrastructure agenda, the balance between development ambitions and debt sustainability will remain a key issue for policymakers and stakeholders alike.