By Jamillah Kemigisa
In a significant fiscal move, Parliament has authorized the government to borrow up to €500 million (Two trillion two hundred fifty billion Ugandan Shillings UGX 2,250,000,000,000) from two major financial sources to support the 2024/25 national budget. The approved borrowing includes up to €270 million from the African Export-Import Bank (Afreximbank) and up to €230 million from a consortium comprising Eco Bank and the Development Bank of South Limited.
The new loans aim to bridge critical budget shortfalls caused by persistent economic pressures and revenue underperformance. Government officials have described the external borrowing as a “strategic intervention” designed to stabilize the economy and ensure the continued delivery of essential public services and development initiatives.
According to the Ministry of Finance, the funds will be directed toward priority sectors such as infrastructure, healthcare, and education. However, a comprehensive spending plan is yet to be disclosed.
The borrowing comes amid growing public concern over the nation’s rising debt burden. Economists have warned that while concessional loans can provide essential liquidity, unchecked borrowing could jeopardize long-term fiscal sustainability.
Opposition lawmakers have expressed skepticism about the decision, demanding greater transparency and accountability regarding how the borrowed funds will be managed. “We cannot continue to borrow blindly. Parliament must demand detailed expenditure frameworks and regular audits,” said one MP.
With parliamentary approval secured, attention now shifts to finalizing the loan terms and disbursement schedules, expected to be concluded in the coming weeks.
Background
The government’s decision to take on €500 million in new debt comes against a backdrop of mounting fiscal challenges, including sluggish economic growth, weak revenue collection, and rising costs of public service delivery. The 2024/25 budget has been strained by increased spending on infrastructure, healthcare, and education, while tax revenues have failed to keep pace.
In recent years, the government has increasingly relied on external borrowing to close budget gaps, raising concerns among economists and civil society groups about the country’s growing debt load and the need for stronger fiscal discipline.
Although the loans from Afreximbank and the Eco Bank–Development Bank consortium are described as strategic, they arrive at a time when public scrutiny of government borrowing and financial transparency is intensifying. While Parliament’s authorization signals political will to address budgetary challenges, the absence of a detailed spending plan has fueled demands for tighter oversight.
This latest borrowing initiative highlights a dilemma faced by many developing countries: the need to address immediate development priorities while safeguarding long-term debt sustainability and enhancing domestic revenue mobilization.
