Uganda’s growing dependence on domestic borrowing is raising alarms about its effects on private sector credit availability and the nation’s path to financial independence, warns the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda. Herbert Kafeero, SEATINI Uganda’s Deputy Executive Director, highlighted that the country’s continued use of borrowing to address revenue shortfalls undermines efforts to achieve self-sufficiency. He emphasized that financial independence requires prioritizing domestic resource mobilization over recurrent debt, noting that debt servicing imposes a dual burden on Ugandans. Kafeero also challenged the notion that government borrowing bolsters the local banking sector, pointing out that most commercial banks operating in Uganda are foreign entities. This dynamic, he argued, risks diverting credit away from private businesses as banks favor government securities over riskier private-sector loans.
Kafeero warned that domestic borrowing often involves higher interest rates and shorter repayment terms compared to concessional loans, exacerbating fiscal pressures. He stressed that government financing should focus on projects with clear implementation readiness and strong economic returns to ensure responsible use of funds. The deputy director also called for improved parliamentary oversight, enhanced public investment management, and increased domestic revenue collection to reduce reliance on debt. These measures, he said, are critical to preventing further strain on the economy and ensuring that borrowing does not compromise long-term financial stability. His remarks underscore broader concerns about the sustainability of Uganda’s fiscal policies amid rising public debt levels.
The debate over domestic borrowing comes as Uganda’s government continues to expand its fiscal operations, with recent initiatives including infrastructure projects and targeted support for education and military housing. However, Kafeero’s analysis highlights a tension between short-term budgetary needs and the long-term implications for economic growth. By prioritizing high-impact investments and fostering transparency in financial management, he argued, Uganda could mitigate the risks associated with debt-driven development. His call for “responsible borrowing” aligns with global discussions on sustainable fiscal practices, particularly in emerging economies facing similar challenges.
SEATINI Uganda’s findings add to a growing discourse on the balance between public investment and private-sector development. As the country navigates its economic trajectory, the interplay between government financing strategies and market dynamics will remain a critical area of scrutiny. Kafeero’s insights serve as a reminder of the need for policies that safeguard both fiscal health and inclusive growth, ensuring that borrowing serves the broader public interest rather than exacerbating existing vulnerabilities.