Although Uganda inherited a significant debt from its colonial government in 1962, the country’s debt increased rapidly between 1966 and 1986. During this period, massive corruption, political instability and conflict undermined economic growth and reduced tax collection. Furthermore, the British colonial authorities had underdeveloped Uganda’s manufacturing sector making Uganda over-reliant on imports and reducing the viability of its economy and tax collection. A sharp decline in coffee prices in the 1980’s and 1990’s coupled with the heavy investment in rebuilding a war-torn economy, further worsened Uganda’s debt between 1986 and 2006. In fact, by 1992, Uganda’s debt to GDP ratio had grown to 109%, from 31% in 1987.
The rapid increase in Uganda’s debt led to loan rescheduling programmes by the Paris Club in 1989 and 1992, but this was too little too late. In 2006 the country received 100% debt cancellation through the Multilateral Debt Relief Initiative, but this only reduced the country’s debt by 20% given the multiplicity of lenders. Despite economic growth, Uganda continues to experience rising debt to GDP ratios – reaching 57.9% of GDP in 2022, from 45.1% in 2019.
Uganda received several credit facilities from China, the World Bank and IMF including USD 1 Billion for post-COVID recovery in 2021. The latest USD 240 million, received in January 2023, was the final payment under the 2021 loan. Uganda, however, still experiences massive corruption, which undermines fiscal discipline. Uganda is the second highest recipient of Chinese loans among East African countries, accounting for 33.9% of all Chinese loans in the region between 2015 and 2020. The IMF and World Bank have often cited increasing transparency, accountability and governance reforms as means of bolstering efficient public expenditure and debt management. Uganda has been ranked by the IMF and World Bank as having a moderate risk of debt distress. The rapid increase in debt levels, however, threatens to move into debt distress.
In August 2023, the World Bank announced it would halt new lending to Uganda as the anti-LGBTQ law, enacted in May 2023, is against the bank’s values. Uganda has had to revise its budget based on the change in availability of financing. Other institutions, civic groups and states have also threatened to halt aid and loans to the country, stating at this stage that projects would be funded on a selective basis.
Communicable diseases, including malaria, HIV, and tuberculosis, account for up to 50% of mortality and morbidity in Uganda. Non-communicable diseases account for 30% of deaths. Recurrent Ebola outbreaks as well as COVID-19 have also placed strain on Uganda’s health budget. Uganda’s population is estimated to be 47 million. According to the United Nations Children’s Fund (UNICEF), Uganda has a maternal mortality rate of 438 per 100,000 live births, and an under-5 years child mortality rate of 90 per 1000 live births. Uganda also records one of the highest levels of malnutrition in Africa ( 29% of children considered stunted).
Through World Bank support, Uganda has engaged in health system strengthening. Resource inadequacy, characterized by limited budget allocations, tax evasion and rising debt continue to undermine progress. For instance, approximately 12% of tax revenue is lost through evasion, while debt service costs account for 30% of tax revenue. This limits capacity to invest in public goods and services, with resources diverted to debt interest and repayments. Uganda also loses potential revenue through double taxation agreements, tax incentives and tax exemptions. Exemptions alone averaged USD 14.8 billion more than the primary healthcare budget in 2023/2024. Oxfam estimates Uganda will forego 6% of all expected tax revenue (2% of the health budget) due to exemptions on dividends. This is only for a single oil exploration area by Total Energies.
64.4% of Uganda’s revenue is from indirect taxes – mostly taxes on consumption and applying to everyone. This disproportionately affects the poor, with a higher proportion of their income spent on goods such as food.
Uganda is constitutionally obligated by paragraph IX and XX of its Constitution to provide health services for all. Paragraph IX in Article 8 of the UN Declaration on the Right to Development, the African Charter on Human and Peoples’ Rights (ratified 1986), and the UN International Covenant on Social, Economic and Cultural Rights (ratified 1987) also place obligations on the state. The realization of this right, however, has been stunted by debt, and a result of insufficient resources.
According to the Uganda Insurance Regulatory Authority (UIRA), less than 1% of Ugandans have private health insurance. The state is currently establishing the National Health Insurance Scheme to address this. In the meantime, 41% of health expenditure is out of the pockets of citizens. High levels of poverty, coupled with 10% inflation, have squeezed incomes, leaving households unable to buy food and other basic goods, let alone spend on healthcare. Global challenges like the war in Ukraine, COVID-19 and climate change continue to reduce tax collection, and increase spending needs, especially in relation to climate adaption. The resultant underfunding of public health has forced more than 24 million people to access private facilities, which are out of reach of the poorest and most vulnerable. This underlines the need for greater efforts and resources invested in expanding the reach and quality of universal health coverage (UHC).
In 2022/2023, Uganda’s total budget increased by 47%, however, the health budget only increased by 0.7%. Despite the increase, at 7.7% of total expenditure, it still falls short of the 15% recommended by the Abuja Declaration. Over 50% of health funding comes from donors. Individuals and private actors also play a role in health provision. During COVID-19, donor funding peaked at 66% of the health budget, but continued reliance on donors is generally unsustainable and unpredictable.
The way forward for Uganda’s health financing
In view of the above, Uganda should urgently and effectively implement its health financing strategy which acts as a blueprint for resource mobilization in the sector. Uganda must also recommit itself to timely, adequate, quality, accessible and acceptable health services for all – in line with its constitutional and international human rights law obligations and the Abuja Declaration. This involves committing significantly more resources to revamping health infrastructure, strengthening medical and pharmaceutical supplies, enhancing the provision of UHC (including primary healthcare), broadening access to affordable health insurance, and improving its disease surveillance systems. To address the crowding out of health funding, creditors need to work with Uganda to provide debt relief and restructuring and redirect resources back towards health. Enhanced transparency and accountability in resource management, fast-tracked tax reforms around indirect taxes, exemptions, tax evasion and avoidance, as well as tackling corruption will further bolster the available pool of resources for investment in health.