Kampala, Uganda – October 8, 2025: Uganda’s financial sector faces mounting pressure as the nation approaches its January 12, 2026 general elections, with the country’s public debt reaching UGX 116.2 trillion (US$32.3 billion) by June 2025—equivalent to 51.3% of GDP. The convergence of election preparations and escalating debt obligations has created what economists describe as a critical fiscal juncture for the East African nation.
The banking sector reported non-performing loans totaling UGX 1.019 trillion by 2024, representing a 4.69% ratio of total gross loans. This financial stress occurs as Uganda prepares for elections that will cost an estimated UGX 838.7 billion, with the Electoral Commission facing a funding shortfall of UGX 623.9 billion.
Uganda’s debt has increased dramatically from US$25.6 billion in June 2024 to US$32.3 billion by June 2025, marking a 26.2% surge driven primarily by domestic borrowing, which jumped 52.7% compared to external borrowing’s 6.2% increase. President Yoweri Museveni, 81, who has ruled since 1986, was cleared by the Electoral Commission on September 23, 2025, to seek a seventh term.
Banking Sector Confronts Rising Default Risk
The Uganda banking sector recorded UGX 1.019 trillion in non-performing loans as of 2024, down from UGX 1.188 trillion in 2023, though the sector-wide improvement masks persistent challenges at individual institutions. The non-performing loan ratio stood at 4.69% in 2024, according to official banking statistics.
Recent Bank of Uganda data shows the average ratio of non-performing loans to total gross loans fell to 4.95% over fiscal year 2023/24, compared to 5.73% in the previous year. However, banking industry reports indicate significant variation among institutions, with some major banks continuing to struggle with substantial distressed debt portfolios.
The Electoral Commission’s budget crisis adds another layer of uncertainty. Justice Simon Byabakama, EC Chairperson, revealed that while the commission requires UGX 838.7 billion for the 2026 elections, it faces a funding gap of UGX 623.9 billion in the 2025/26 financial year. This shortfall threatens essential electoral functions including polling day operations, vote tallying, and logistical support.
Historical data shows Uganda’s election costs have steadily escalated: UGX 476.58 billion in 2015-16, UGX 765.7 billion in 2020-21, and now UGX 838.7 billion projected for 2025-26. The 2015/16 budget period saw significant fiscal expansion, with the government raising that year’s budget from UGX 18 trillion to UGX 24 trillion through a UGX 6 trillion supplementary allocation.
Debt Crisis Reaches Critical Threshold
Uganda’s public debt stock reached UGX 116.2 trillion by June 2025, with domestic debt accounting for UGX 60.3 trillion and external debt UGX 55.9 trillion. Finance Minister Matia Kasaija maintains the debt remains “sustainable,” though it now exceeds the IMF’s recommended 50% debt-to-GDP threshold for low-income countries.
The debt-to-GDP ratio increased to 51.3% by June 2025, up from 46.9% the previous year. Official government projections indicate debt service now consumes significant budget resources, with interest payments rising to 4.3% of GDP by March 2025. The shift toward domestic borrowing has “heightened debt service expenses due to the elevated yields sought by the local market,” according to the finance ministry’s annual debt report.
Election Dynamics and Opposition Clearance
Opposition leader Robert Kyagulanyi, known as Bobi Wine, was cleared by the Electoral Commission on September 24, 2025, to challenge President Museveni. The 43-year-old musician-turned-politician, who garnered 34.83% of votes in the 2021 election compared to Museveni’s 58.64%, leads the National Unity Platform and commands significant support among Uganda’s youth.
The Electoral Commission confirmed eight presidential candidates for the January 2026 election, with official campaigning scheduled to begin on September 29, 2025. Presidential nominations took place on September 23-24, 2025, followed by parliamentary nominations on September 16-17, 2025.
Regional Context and External Dependencies
Uganda’s debt crisis reflects broader regional financial pressures affecting East African countries. The country’s debt trajectory has been shaped by infrastructure investments, including the East African Crude Oil Pipeline (EACOP) project, which has secured financing from Chinese banks after Western lenders withdrew.
The World Bank resumed lending to Uganda in June 2025 after suspending funding over the Anti-Homosexuality Act, with the institution stating it would “resume funding for projects directly benefiting Ugandans most in need”. Uganda continues negotiations with the IMF for a new Extended Credit Facility to replace the $1 billion program that ended in 2024.
Economic Fundamentals and Fiscal Pressures
Official statistics show Uganda’s total public debt increased from US$25.63 billion in June 2024 to US$32.33 billion by June 2025. The surge was primarily driven by expanded domestic borrowing, with the share of domestic debt rising to 51.9% of total debt stock by June 2025, up from 42.9% the previous year.
Government projections indicate Uganda’s economy reached $66 billion GDP in 2024, with President Museveni pledging to achieve $500 billion by the end of his next five-year term. However, debt service obligations continue to constrain fiscal space, with domestic interest payments alone consuming 3.7% of GDP by March 2025.
The finance ministry’s debt sustainability analysis indicates external debt service will account for significant budget resources in coming years, while domestic borrowing costs have increased due to higher market yields. This fiscal pressure occurs as Uganda prepares for elections requiring substantial government expenditure amid calls for improved infrastructure and public services.
Constitutional and Electoral Framework
President Museveni’s candidacy follows constitutional amendments that removed presidential age limits in 2017, allowing the 81-year-old leader to seek additional terms. Born on September 15, 1944, Museveni has been Uganda’s president since January 26, 1986, making him one of Africa’s longest-serving leaders.
The January 12, 2026 election date was officially confirmed by the Electoral Commission, with polling scheduled to take place between January 12 and February 9, 2026. Vote counting and result declaration will follow constitutional procedures, with the Electoral Commission managing the process from its headquarters.
As Uganda approaches this critical electoral period, the intersection of mounting debt obligations, banking sector pressures, and election financing requirements presents significant challenges for the country’s economic stability and democratic processes. The outcome will determine not only political leadership but also the fiscal trajectory of a nation grappling with the limits of debt sustainability while seeking to maintain democratic governance.
