Uganda expects its fiscal deficit to narrow to 3% of GDP by the 2030/31 financial year, down from 6% this year, as the government shifts toward cheaper external borrowing to rein in debt-servicing costs, the central bank said on Wednesday.

The projection follows a new debt management strategy unveiled in March that aims to reduce reliance on expensive domestic borrowing while increasing access to concessional external financing.

The central bank said Uganda's public debt remains at a moderate risk of distress, although rising debt-servicing costs and limited capacity to absorb economic shocks continue to pose vulnerabilities.

Uganda's total public debt rose 8% to $34.9 billion in the second half of last year, driven largely by increased domestic borrowing, according to finance ministry data.

However, the economy continued to strengthen. The central bank said growth accelerated to 8.5% in the second quarter of the 2025/26 fiscal year, up from 5.3% a year earlier, supported by oil sector investments, stronger exports and higher agricultural production.