Fitch Affirms Uganda at ‘B’, Ratings Constrained by Weak GDP, Rising Debt
Fitch Ratings has affirmed Uganda’s Long-Term Issuer Default Ratings (IDRs)at ‘B’ with a stable outlook. Uganda’s issuer ratings are constrained by low GDP per capita, weak governance, sizeable twin fiscal and current account deficits, rising public debt/GDP and a high interest burden.
Ratings analysts explained that the country’s tax base is structurally narrow, expenditure is rigid, and public financial management is weak.
The ratings are supported by a record of macroeconomic stability and favourable medium-term growth prospects, given the approaching commencement of oil production, Fitch said.
“We expect broad-based real GDP growth of 6.3% in 2026, rising to 7.5% in 2027 as oil production begins (expected in 1H). We project average oil output of 50,000 barrels/day in 2027, rising to 210,000 b/d in 2028 as the Kingfisher and Tilenga fields ramp up towards combined full capacity of 230,000 b/d”.
Fitch said higher world energy prices will add some cost-push pressure to inflation, which we forecast to rise to 4.4% on average in 2026. This is comfortably below the ‘B’ median of 5.6%, helped by a cautious and credible monetary policy.
Uganda’s general government (GG) budget deficit for 2025/26 (FY26, ended June 2026) is estimated to have widened to 6.4% of GDP, primarily owing to a sharp rise in interest outlays.
The rating report said the start of oil exports in Uganda should narrow the country’s fiscal deficit in FY27, although it is anticipated to remain wide.
Achieving the authorities’ ambitious domestic revenue targets will be challenging, and analysts expect over-execution of wages and other current spending.
Supplementary budgets are a recurrent feature of the fiscal cycle, reflecting weaknesses in expenditure planning and discipline.
A primary budget deficit and high borrowing costs for the sovereign on the domestic market – which accounts for most net fiscal financing – is driving a moderate rise in debt/GDP, which analysts expect to reach 56.1% in FY27, above the current year ‘B’ median of 54.7%.
In FY2028, Fitch analysts expect around a 1pp rise in debt/GDP as interest costs stay elevated and a large share of increased oil revenues are saved in a Petroleum Fund, widening gross borrowing needs.
Fitch’s GG debt definition includes domestic arrears. There is uncertainty around the precise stock, which could be higher than we currently estimate.
“ We estimate the interest/revenue ratio to have risen by 6.4pp year-on-year to 31.5% in FY26, and we expect a further increase in FY27, driven by ongoing high real yields on domestic debt”.
The report revealed that Uganda’s borrowing costs are structurally elevated, reflecting large domestic financing needs relative to the local market and a high real policy rate.
The share of concessional external lending in net GG finance has declined in recent years, although a new, 10-year World Bank partnership should partially reverse the trend.
Fitch analysts project Uganda’s current account deficit (CAD) to widen by 2pp of GDP to 6.8% in 2026 due to higher world energy prices, ongoing imports related to oil sector development, an expected contraction of tourism receipts due to incidences of Ebola and disrupted remittance inflows caused by conflict in the Middle East.
“We forecast the CAD will narrow to 2% of GDP in 2028, supported by oil exports, which is close to the projected ‘B’ median for that year”.
Fitch said it expects a net drawdown in FX reserves in 2026, owing to a high import bill and more limited foreign portfolio flows amid global interest rate uncertainty, after an increase of almost USD2.7 billion in 2025 driven by FDI in the oil sector and record investment into Ugandan Treasuries.
Uganda’s reserve coverage is projected at 2.7 months of current external payments (CXP) in 2026, down from 3.1 months in 2025.
Fitch anticipates a modest recovery in 2027 as oil exports begin, accelerating in 2028, although the buffer will remain weaker than for peers (the current year ‘B’ median is 4.2 months of CXP).
Uganda’s key agricultural sector is among the world’s least dependent on fertiliser and the economy generally has low energy intensity, providing some insulation against global supply dislocations related to conflict in the Middle East.
Fuel availability in the country has been supported by a five-year supply arrangement between an international oil trading company and the Ugandan National Oil Company, the country’s sole importer. There is no active subsidy on fuel.
: Yoweri Museveni, Uganda’s president, won a seventh consecutive term in the January 2026 general election, extending his rule to 2031, when he will be 86 years old.
His party, the National Resistance Movement, increased its seats in parliament to cement a super-majority. The president has a firm grip on the party, but issues around succession invite the prospect of political uncertainty and policy discontinuity. #Fitch Affirms Uganda at ‘B’, Ratings Constrained by Weak GDP, Rising Debt# Ugandan President, Museveni, Seeks 7th Term After 4 Decades in Power
