Faith Nyasuguta
Uganda’s Parliament has approved a €500 million ($568 million) loan package to finance critical infrastructure projects, despite mounting concerns over the country’s escalating public debt.
The loan will be sourced from three regional lenders: €270 million from the African Export-Import Bank (Afreximbank), and €230 million jointly from Ecobank Uganda and the Development Bank of Southern Africa. Finance Minister Matia Kasaija announced the borrowing plan, emphasizing its role in supporting Uganda’s infrastructure development goals.
Opposition lawmakers have expressed strong reservations, citing the country’s rising debt levels. Uganda’s public debt increased by 18% in 2024, reaching $29.1 billion, largely due to increased domestic borrowing. This surge in debt has led to a credit rating downgrade, raising concerns about the country’s debt sustainability.
Despite these concerns, the government maintains that the loans are necessary to fund infrastructure projects aimed at boosting economic growth. Uganda recently signed an $800 million deal with the Islamic Development Bank to fund railway, health, transport, and energy infrastructure projects.
In a move to address debt sustainability, Uganda plans to cut external borrowing by 98% in the financial year to June 2026. The government aims to prioritize concessional loans and reduce reliance on commercial borrowing. Finance Minister Kasaija stated that the country is committed to maintaining its debt-to-GDP ratio below 50%.
The approved €500 million loan is expected to fund various infrastructure projects, including roads, energy, and transport systems. These developments are part of Uganda’s broader strategy to enhance trade, connectivity, and economic integration across East and Central Africa.
As Uganda moves forward with these ambitious infrastructure plans, balancing development needs with fiscal responsibility remains a critical challenge. The government’s ability to manage its debt levels while pursuing growth will be closely watched by both domestic stakeholders and international partners.
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