Uganda has unveiled a Shs72.4 trillion national budget for the Financial Year 2025/26, with a critical revelation standing out: statutory interest payments on public debt will consume the largest single portion of the budget surpassing allocations to any individual social or productive sector.
Kasaija said interest payments for the upcoming financial year are projected at Shs11.33 trillion, representing 20.6% of total government spending. This figure exceeds the allocations to education (Shs5.04 trillion), health (Shs5.87 trillion), and even development expenditure (Shs6.91 trillion from domestic sources).
The ballooning cost of debt servicing underscores growing fiscal pressure, driven largely by increased domestic borrowing. Of the Shs11.33 trillion allocated to interest payments, over Shs9.47 trillion will go toward domestic debt, while Shs1.85 trillion is earmarked for servicing external debt.
The high cost of debt servicing is crowding out critical public investments. Despite widespread calls to improve healthcare and education infrastructure, these sectors continue to receive significantly less funding than what is being allocated to debt repayments.
Additionally, the government will spend another Shs10.03 trillion on domestic debt refinancing and Shs4.98 trillion on debt amortisation. Altogether, debt-related allocations will exceed Shs26 trillion, approximately 36% of the entire national budget.
Uganda’s growing reliance on domestic borrowing—typically more expensive than concessional external loans—has escalated the cost of maintaining public debt.
Kasaija acknowledged this concern and noted that going forward, the government intends to prioritise concessional financing and strengthen domestic revenue mobilisation to enhance debt sustainability.
While the government maintains that borrowing is supporting growth-enhancing investments, the burden of servicing this debt is becoming increasingly unsustainable. Public debt as a percentage of GDP is expected to remain high, with the fiscal deficit for FY2025/26 estimated at 7.6% of GDP.
Despite efforts to increase tax collection—such as digital enforcement through EFRIS and enhanced rental income tracking—the significant allocation toward interest payments could undermine service delivery, reduce social protection coverage, and hinder progress toward national development goals.
Uganda’s FY2025/26 budget presents a sobering picture: the country’s largest fiscal commitment is managing debt rather than expanding essential public services. While investment in education, health, and infrastructure remains a declared government priority, the budget arithmetic paints a picture of a country increasingly constrained by its borrowing obligations.
Sector Highlights
Health Sector: Shs5.87 trillion: The health sector has been allocated Shs5.87 trillion, reflecting an increase from previous years. The funds will support the operationalisation of Health Centre IVs, expansion of primary healthcare, scaling up of e-health systems, and strengthening of nutrition and reproductive health programs.
The government will also continue deploying Community Health Extension Workers and constructing specialised centres for cancer and cardiovascular disease treatment. Enhancements to the national ambulance and emergency referral system are also planned.
Education Sector: Shs5.04 trillion
The education sector will receive Shs5.04 trillion to support Universal Primary and Secondary Education, teacher recruitment, and infrastructure development. Key initiatives include:
Construction of 116 new seed secondary schools and expansion of 61 existing ones
Rehabilitation of 120 traditional secondary schools and 31 institutions for learners with special needs
Operationalisation of Bunyoro and Busoga universities
Procurement of instructional materials to improve the textbook-to-student ratio from 1:15 to 1:3
Implementation of digital school inspections to ensure quality standards
Transport and Infrastructure: Shs6.92 trillion
A total of Shs6.92 trillion has been allocated for integrated transport infrastructure, including roads, bridges, air, water, and rail systems. Key priorities include operationalising Kabalega International Airport, further capitalising Uganda Airlines, and rehabilitating aerodromes.
Investments will also improve connectivity to key growth centres, such as the Dei BioPharma facility in Matugga, the coffee processing plant in Ntungamo, and a fertiliser factory in Mpigi.
Agro-Industrialisation and Wealth Creation: Shs2.43 trillion
To accelerate economic transformation, Shs2.43 trillion has been set aside for wealth creation initiatives, including:
Shs1.059 trillion for the Parish Development Model (PDM)
Shs1 trillion for recapitalising the Uganda Development Bank (UDB)
Funding for Emyooga, INVITE, GROW, and skilling hubs targeting youth and women entrepreneurs Social Protection: Shs811 billion
Under the Social Assistance Grants for the Elderly (SAGE), Shs811 billion has been allocated to support nearly half a million senior citizens. Additional funding will benefit youth and women through enterprise grants and group-based empowerment initiatives.
The FY2025/26 budget signals the government’s commitment to consolidating service delivery gains and accelerating economic transformation through strategic investments in people-centric sectors. However, the overwhelming share of resources committed to debt servicing reveals a difficult truth: Uganda’s fiscal future may be increasingly shaped not just by what it aims to achieve, but by what it owes.
