KAMPALA – Uganda’s fiscal space is tightening as the cost of servicing external debt surged to $416.6 million in the last quarter, driven by a strengthening U.S. dollar and a high concentration of dollar-denominated liabilities.
Data released by the Ministry of Finance on Tuesday showed that nearly half of Uganda’s external debt is now held in U.S. dollars, exposing the East African nation to significant exchange rate volatility.
The Euro accounts for approximately 35% of the portfolio, with the Chinese Yuan and Japanese Yen making up the remainder.
The rising costs come at a sensitive time for President Yoweri Museveni’s government, which is balancing heavy infrastructure investment with social spending following a contentious January election.
Analysts warn that if the shilling continues to weaken against the dollar, the government may be forced to divert funds from healthcare and education to meet its international obligations.
“The dominance of the dollar in our debt portfolio remains a key vulnerability,” the Ministry stated in its quarterly bulletin.
Despite the pressure, the government is moving forward with a National Emerging Technologies Strategy, hoping that investments in AI and blockchain will modernize the economy and create new revenue streams to offset the debt burden.
