The United Nations Trade and Development agency, UNCTAD, has warned that rising public debt interest costs are increasingly squeezing spending on health, education, and other development priorities in developing countries, including Uganda. According to UNCTAD's latest report, "A World of Debt 2026: Rising debt costs and stalling development," developing countries paid nearly one trillion US dollars in net interest on public debt in 2025. This figure is more than double the amount paid a decade earlier.
The report highlights that interest payments accounted for a median 8.1 percent of government revenue in developing countries in 2025, nearly twice the level recorded in 2010. UNCTAD notes that 51 developing countries now spend more on interest payments than on either health or education, affecting 3.7 billion people. The agency warns that the growing cost of borrowing is reducing the resources available to governments to invest in development.
The situation is particularly dire in Uganda, where government figures show that the cost of servicing public debt has become a growing pressure on the national budget. In the financial year 2024/25, interest payments accounted for 26.2 percent of government revenues. This proportion is projected to rise to 30.2 percent in FY2026/27. Uganda's public debt had reached 116.2 trillion shillings by June 2025, equivalent to 51 percent of GDP.
UNCTAD estimates that developing countries could save about 500 billion dollars each year if they were able to borrow at the same rates as developed economies. This could create substantial fiscal space for investment in health, education, infrastructure, and other development priorities. The agency notes that borrowing costs in developing countries are structurally higher than those in developed economies, with the gap widening the financial pressure on governments.
The warning has implications for other East African countries, including Kenya, Tanzania, and Rwanda. In Kenya, the National Treasury's debt service data shows that the country paid 1.72 trillion Kenyan shillings in domestic and external debt service during FY2024/25. Tanzania's debt position is comparatively less severe, with total interest payments at 2.47 percent of GDP in 2025. Rwanda, however, has faced significant external debt-service pressure.
UNCTAD is calling for action at both the national and international levels to address the issue. At the global level, it recommends reversing declines in official development assistance, expanding lending by multilateral and regional development banks, and strengthening technical assistance. At the national level, it calls for stronger macroeconomic management and public institutions, better debt-portfolio management, and greater use of innovative financing instruments.
The agency's warning comes as governments across East Africa continue to borrow to finance infrastructure, energy, transport, and other long-term investments. This raises questions over whether the economic returns from new borrowing will be sufficient to cover the growing cost of servicing existing debt. President Museveni and William Ruto of Kenya have been at the forefront of the campaign for reform in the global debt architecture.
Key points
- Developing countries paid nearly one trillion US dollars in net interest on public debt in 2025.
- 51 developing countries now spend more on interest payments than on either health or education.
- UNCTAD estimates that developing countries could save about 500 billion dollars each year if they were able to borrow at the same rates as developed economies.
