By Ben Musanje
Uganda’s external debt-service burden is projected to consume 30.1% of gross foreign-exchange reserves by FY2028/29, marking the peak of pressure on the country’s external liquidity over the medium term, according to the Bank of Uganda.
The central bank, however, said Uganda’s reserve position remains broadly adequate throughout the forecast period because the debt-service-to-reserves ratio is projected to remain below one-third of gross reserves.
The ratio is projected to rise from 21.6% in FY2025/26 to 24.5% in FY2026/27, before falling to 21.3% in FY2027/28.
It will then rise sharply to 30.1% in FY2028/29, before declining to 28.5% in FY2029/30 and 23.4% in FY2030/31 as reserves accumulate.
Debt service to peak at US$2.52 billion
The projected pressure is partly driven by rising external debt-service obligations.
Cash debt service is estimated at US$1.44 billion in FY2025/26 and is projected to rise to US$1.56 billion in FY2026/27.
It is expected to fall slightly to US$1.51 billion in FY2027/28, before jumping to US$2.33 billion in FY2028/29.
Debt service is projected to reach US$2.52 billion in FY2029/30, before easing to US$2.41 billion in FY2030/31.
At the same time, gross reserves are projected at US$6.69 billion in FY2025/26, US$6.40 billion in FY2026/27, US$7.07 billion in FY2027/28 and US$7.73 billion in FY2028/29.
Reserves are then projected to rise to US$8.85 billion in FY2029/30 and US$10.27 billion by FY2030/31.
The rise in reserves is expected to ease the debt-service burden after the FY2028/29 peak.
Reserves rise by US$2.4 billion
Uganda’s external position strengthened in the year to June 2026.
The balance of payments recorded a surplus of US$2.39 billion in the 12 months to June 2026, while the financial account recorded a surplus of US$6.45 billion.
The developments supported an increase in international reserves of US$2.4 billion, taking reserves to US$6.7 billion at the end of June 2026.
That was equivalent to 3.7 months of import cover.
BoU said the reserve position is broadly comfortable in the near term, but cautioned that the debt-service-to-reserves ratio alone does not provide a complete picture of external liquidity risks.
External shocks could put reserves under pressure
The central bank identified several risks that could weaken Uganda’s reserve position.
These include weaker export earnings, lower remittance and capital inflows, higher global oil prices, exchange-rate depreciation and higher-than-anticipated external borrowing or debt-service costs.
Tighter global financial conditions could also trigger capital outflows and increase exchange-rate instability.
Such developments could put additional pressure on reserves while raising risks to domestic inflation.
A weaker external environment could therefore make it more difficult for Uganda to accumulate reserves at the pace projected in the medium-term fiscal framework.
FY2028/29 emerges as pressure point
The figures point to FY2028/29 as the key pressure point in Uganda’s external debt-service outlook.
That year, cash debt service is projected at US$2.33 billion, while gross reserves are projected at US$7.73 billion, producing a debt-service-to-reserves ratio of 30.1%.
By FY2030/31, gross reserves are projected to reach US$10.27 billion, while cash debt service is expected to ease to US$2.41 billion, reducing the ratio to 23.4%.
BoU said reserve adequacy should therefore be assessed using broader external liquidity indicators rather than relying solely on the debt-service-to-reserves ratio.
The central bank’s assessment is that Uganda’s reserves remain broadly adequate against projected external debt-service obligations, but the position remains exposed to external shocks that could affect exports, capital inflows, the exchange rate and the cost of servicing external debt. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
