NEWS ANALYSIS | URN | The government avoided taking on approximately 270 billion shillings in additional debt after the Auditor General’s assessment reduced the amount the Government borrowed to buy out electricity distributor Umeme Company Limited at the end of its 20-year concession.
Parliament had authorised the Government to borrow up to the euro equivalent of US$190.99 million, about 711 billion shillings, for the Umeme buyout.
But the Government eventually borrowed the equivalent of US$118.39 million, or about 440 billion shillings, leaving roughly US$72.6 million, about Shs270 billion, unborrowed.
The reduction represents nearly 38 per cent of the borrowing ceiling approved by Parliament.
However, documents submitted to Parliament on Tuesday show that while the Government may have contained its immediate borrowing requirement, the lower payout did not necessarily bring a complete end to the financial dispute surrounding Umeme’s exit.
The company reserved the right to pursue reconciliation of the final buyout amount, supplementary payments, damages and interest, potentially leaving the Government exposed to further financial obligations depending on the outcome of negotiations or dispute-resolution processes.
A report presented to Parliament by the Minister of State for Finance, Planning and Economic Development, Shartsi Kutesa Musherure, that URN saw on Thursday outlines how the Government mobilised and utilised the financing following Parliament’s approval in March 2025.
The report, dated August 12, 2026, signed by Minister of Finance, Planning and Economic Development Henry Musasizi, accounts for the borrowing and actual payout to Umeme and explains why the Government ultimately contracted a substantially smaller loan than the amount Parliament had authorised.
The report states: “Only USD 118,385,603 recommended by the Auditor General as payout to UMEME Limited was borrowed by the Government, and paid to UMEME Limited within the conditions set out in the Parliamentary Resolution.”
That amount translates to roughly 440 billion shillings at the current indicative exchange rate.
When Parliament approved the borrowing on March 20, 2025, it authorised a maximum of US$190.99 million, then equivalent to a potential debt exposure of roughly Shs711 billion at today’s indicative exchange rate.
Government was directed to pay Umeme only an amount that had been verified, approved or recommended by the Auditor General before March 31, 2025.
Parliament further stipulated that if the amount required for the payout was lower than the borrowing ceiling, the unused balance would be cancelled and would not form part of Uganda’s public debt.
The Finance Minister was also required to return to Parliament with a report showing the actual amount paid.
According to the Finance Ministry, the Auditor General’s final special audit report dated March 26, 2025 recommended a payout of US$118.39 million. Government subsequently signed a financing agreement with Stanbic Bank Uganda Limited and Standard Bank of South Africa Limited.
The Government ultimately drew €106.81 million, equivalent to the approved US$118.39 million, rather than borrowing the full amount Parliament had authorised.
The utilisation documents show that the Government requested the €106.81 million facility on May 29, 2025, with the funds directed to the Government of Uganda’s euro holding account at the Bank of Uganda.
In practical terms, the audit recommendation and Parliament’s conditions prevented the Government from adding approximately Shs270 billion to the national debt.
Article 159 of the Constitution permits the Government to borrow, but provides that borrowing, guarantees and loans must be authorised by or under an Act of Parliament.
It further requires loan terms and conditions to be laid before Parliament and approved by resolution.
The Constitution also requires Parliament to receive information on the country’s indebtedness, debt servicing and the utilisation and performance of loans.
Article 160 goes further by defining public debt to include not only principal, but also interest and the costs and expenses associated with managing that debt.
The Public Finance Management framework operationalises these constitutional principles by placing public borrowing within a system of ministerial responsibility, parliamentary approval and fiscal accountability.
Government borrowed only the amount independently recommended by the Auditor General, while the balance of the parliamentary borrowing authority was not converted into public debt.
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