Fitch Affirms Uganda Issuer Rating at ‘B’, Outlook Stable
Fitch Ratings has affirmed Uganda’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a stable outlook. Uganda’s ratings are supported by favourable medium-term growth prospects, a record of relative macroeconomic stability helped by the central bank’s inflation targeting framework, and Fitch’s expectation that government debt/GDP will stabilise in the medium term.
The ratings are constrained by low gross domestic product per capita, weak governance, a low government revenue base and twin budget and current account deficits (CAD) higher than peers.
“We project real GDP growth to rise to 6.5% in 2025 and 7.5% in 2026, from 6.3% in 2024, led by oil sector development. This will also be supported by a recovery in agriculture, strong coffee exports, and continued public infrastructure investment”.
Fitch ratings analysts expect oil production to start in the second half of 2026, peaking at 230,000 barrels a day around 2028, propelling growth to around 9% in 2027.
The rating note added that the start of oil output is contingent on completion of the USD5 billion pipeline for which funding was previously delayed by environmental and social concerns. The first tranche of financing was secured in March 2025, with two more expected, but the timeline is uncertain, posing a downside risk to our forecast.
Fitch estimates the budget deficit widened to 6.1% of GDP in the fiscal year ending June 2025 (FY25) from 4.7% in FY24, above the 5.7% budget target, mainly due to overspending on security, interest payments and capital projects.
“We project the deficit will remain high at 6.7% of GDP in FY26, above the government’s target of 6.5%, before narrowing to 5.7% in FY27, driven by oil revenue”.
Rating analysts assume revenue collection will fall short of budget targets due to delays in rationalising tax exemptions and grant shortfalls, while overspending on security and welfare is also likely during the election year.
The country’s limited access to external concessional financing, due to persistent creditor concerns about democracy, human rights and corruption, has increased reliance on more costly domestic borrowing, raising debt servicing costs.
Domestic interest costs surged to 21% of revenue in FY25, from 17% in FY24. Rating analysts expect total interest payments to absorb 30% of revenue in FY26 (25% in FY25), before declining as oil revenues bolster government income.
Uganda failed to conclude the last IMF programme and is currently negotiating a new arrangement, the size and timeline of which is uncertain. Reaching an agreement is an upside to our baseline, which does not incorporate new IMF financing through 2027.
The World Bank resumed lending earlier this year after suspending projects due to the enactment of the 2023 Anti-Homosexuality Act. New financing will be project-based loans and grants, with direct budget support unlikely.
“We estimate that general government debt rose to 52.5% of GDP in FY25, from 48.6% in FY24, including domestic arrears and the substitution of central bank overdraft liabilities with government securities. We expect general government debt to stabilise at 53% in the medium term”.
Uganda’s share of external debt in total public debt declined to under 50% of total from 60% in FY23, with 66% from multilateral lenders.
While 75% of Uganda’s external debt is still contracted on concessional or semi-concessional terms, the debt structure has weakened, with commercial debt rising to 18.7% of external debt in March 2025, from 9.5% in June 2022, and 21% of domestic debt maturing within one year at end-2024.
Ratings analysts project that the current account deficit will narrow from 7.5% of GDP in 2024 to 6.0% in 2025, as robust exports partially offset high non-oil import demand from infrastructure build-out and oil investments.
Coffee exports in the first six months of 2025 surpassed 82% of the total for 2024. Fitch analysts project the current account deficit will decline further to 5.4% of GDP in 2026 and 2.2% in 2027, as oil production ramps up.
Fitch ratings analysts forecast oil exports to reach USD3.6 billion in 2027, from around USD850 million in 2026.
The country’s foreign-exchange reserves increased to USD4.3 billion at end-June 2025 from USD3.3 billion at end-2024, as the central bank purchased USD2.2 billion of foreign currency in FY25 amid stable exchange rates and ample FX liquidity.
The central bank also plans to buy gold from local artisanal miners later this year to build up reserves. Analysts expect reserves to decline in 2H25 to cover imports and scheduled debt service obligations, likely ending the year at around USD3.6 billion, covering only 2.2 months of current external payments, below the projected ‘B’ median of 4.4 months, before improving in 2026 and 2027.
President Yoweri Museveni, aged 80 and in office since 1986, will seek another term in the 2026 presidential election scheduled for January.
“We anticipate heightened political and social instability leading up to the election, increasing risks to public finances and macroeconomic stability”, Fitch said.
Analysts recalled that 2021 election period was marked by violence between opposition supporters and security forces.
“We do not expect domestic political tensions will significantly impair access to bilateral and multilateral funding or foreign investment, with stability expected to return post-election”. #Fitch Affirms Uganda Issuer Rating at ‘B’, Outlook Stable South Africa to Offer US New Deal to Avoid 30% Tariff
