IMF Warns Uganda Over Rising Debt as Oil Boom Approaches

KAMPALA, Uganda (XOL Africa) — Uganda’s economy remains on a strong growth path, but rising fiscal pressures and increasing debt vulnerabilities could undermine future progress, the International Monetary Fund (IMF) has warned.

In its 2026 Article IV Consultation report, the IMF said Uganda’s economy has performed well since the end of the 2021–24 Extended Credit Facility programme, supported by strong domestic demand, low inflation and increased private sector credit growth.

The IMF projected Uganda’s real GDP growth reached 6.3% in the first three quarters of fiscal year 2025/26, maintaining momentum from the previous year. Inflation also remained below the Bank of Uganda’s medium-term target, with headline and core inflation at 3.7% and 3.4% respectively in June 2026.

However, the Fund raised concerns over Uganda’s weakening fiscal position, noting that the overall budget deficit widened to 6% of GDP in FY2024/25 and is expected to reach 7.1% of GDP in FY2025/26 due to increased spending and rising interest payments.

“Strengthening domestic revenue mobilisation and enforcing stronger budgetary discipline are critical to building durable fiscal space,” the IMF said.

Public debt is projected to rise to 55.1% of GDP in FY2025/26, with the IMF warning that high debt servicing costs are increasingly limiting government capacity to support private sector growth.

The IMF said interest payments could consume nearly one-third of domestic revenues, creating pressure on government finances and reducing access to credit for businesses.

Oil Production Could Boost Growth

The IMF said Uganda’s economic outlook remains favourable, with the expected start of oil production in late 2026 expected to strengthen government revenues, exports and foreign exchange reserves.

Growth is projected to accelerate above 8% annually during FY2026/27 and FY2027/28 as oil production begins, while foreign exchange reserves are expected to improve over the medium term.

The Fund urged Uganda to establish a transparent framework for managing future oil revenues to ensure they support development while protecting future generations.

“Future oil revenue should be geared to enhancing growth and improving social development while safeguarding intergenerational equity,” the IMF said.

IMF Calls for Governance and Business Reforms

The IMF Executive Board also called on Uganda to strengthen governance, improve the business environment and reduce trade barriers to create more jobs and promote inclusive growth.

The Fund recommended reforms to broaden the tax base, improve public financial management, strengthen anti-corruption institutions and enhance judicial independence.

It also highlighted the need to reduce non-tariff barriers and improve trade logistics to help Uganda benefit from regional and continental markets, including the African Continental Free Trade Area (AfCFTA).

Despite the risks, IMF directors welcomed Uganda’s strong economic performance and said the country’s growth prospects remain positive if reforms are implemented effectively.

“The authorities should prioritize expanding fiscal space through strengthened domestic revenue mobilisation and expenditure restraint,” the IMF said.

The next IMF Article IV consultation with Uganda is expected to take place within the standard 12-month cycle.