When U.S. President Donald Trump announced a 90-day freeze on nearly all U.S. foreign aid in January 2025, Uganda, like many other countries, felt the aftermath almost immediately. For years, American aid has been the sole source of funding for many NGOs and development projects here, from healthcare initiatives to infrastructure improvements, a part of development in Uganda can be directly tied to foreign aid. So, when the aid taps were suddenly turned off, it forced us to look at just how dependent we’ve become on foreign support—hospitals, dams, standard highways…much can be attributed to foreign loans and grants. – Uganda Faces Uncertain Future amidst USAID Freeze
Clinics funded by the President’s Emergency Plan for AIDS Relief (PEPFAR) had to cancel appointments and turn patients away, the President’s Malaria Initiative laid off two-thirds of its staff and in other parts of the world, humanitarian programs providing essentials like clean water and cholera treatment were all on pause. Zambia, for instance, saw medical supplies dry up, and refugee camps in Thailand discharged patients without proper treatment. Diseases we once thought we had got under control, now seem to be on the brink of taking us unawares again. – Trump’s Freeze on Foreign Aid Will Make Diseases Surge
This is why we write today: Should Uganda continue to lean so heavily on foreign loans and aid? Or perhaps it is time Uganda starts thinking about standing on its own feet?
A History of Dependence
Uganda’s story with foreign loans isn’t new. For decades, we have relied on financial support from institutions like the World Bank, the International Monetary Fund (IMF), and bilateral agreements with wealthier nations… I mean, how many times have we run to China for our mega infrastructure projects? These loans have funded everything from new roads and schools to healthcare programs and social services, however, while these funds have supplemented development, they have also led us into a mounting pile of debt.
As of 2024, Uganda’s external debt was sitting at around $13 billion, a hefty sum that has raised eyebrows both locally and internationally. Debt servicing—the money we spend to pay off the interest on these loans—is eating into our national budget, leaving less for our concentrated growth…if you have ever had a loan to repay then, this is clearly feasible—every time you get any funds you remember outstanding debt and how to settle it.
What’s Been Done So Far?
Luckily for many, Uganda isn’t just sitting back and watching the debt pile up. The government has taken some steps to reduce our dependence on foreign loans. For starters, there’s been a push to expand our tax base and improve tax collection, which, of course, has been met with its fair share of ridicule and commentary from the taxpayer on grounds of accountability but hey, it is a step forward. This implies bringing more businesses and individuals into the formal tax system to increase domestic revenue.
Then there’s the oil in the Albertine region. The discovery of these reserves has been observed as a potential goldmine for the country’s economy. If managed well—and that’s a big “if”—this could provide a steady stream of income that reduces our need for external loans.
Uganda is also focusing on promoting local entrepreneurship and industrialization. You have probably seen this in effect with the promotion of value addition on agricultural produce, the Buy Uganda Build Uganda (BUBU) initiatives, and even the recent discussion to ban the sale of imported clothing. By supporting local businesses and industries, the government hopes to create jobs, stimulate the economy, and reduce the reliance on foreign-funded projects. Plus, regional trade partnerships through the East African Community (EAC) are helping to strengthen economic ties with our neighbours, providing more growth opportunities. Ugandan President Wants to Ban Imports of Used Clothing from West
What Happens If We Cut Back on Foreign Loans?
Let’s say Uganda decides to significantly reduce its reliance on foreign loans. What would that look like?
On the bright and positive side, we’d gain more economic sovereignty, in that without strings attached to foreign aid, Uganda would have more freedom to set its own development priorities. Less debt denotes more of our budget could go toward essential services and development.
On that note, in the short term, pulling back from foreign loans could create funding gaps and a period of poverty within the country. Projects that rely on this money might slow down or come to a stop altogether. Public services could feel the pinch, and the road to self-reliance might be a bit bumpy…long and bumpy, even with put-up schemes like the recent purchase of Gold from local dealers to try and shield the economy. – Uganda Bets on Gold to Save the Shilling Economy
Simply put, achieving financial independence isn’t just about cutting off foreign aid—it’s about fixing what’s broken at home, too. Corruption and mismanagement of resources remain significant hurdles in Uganda, and thus if public funds aren’t used efficiently and transparently, it’s hard to make progress, no matter how much money we keep in-house.
There’s also the issue of tax compliance. A large part of Uganda’s economy operates informally, making it difficult for the government to collect enough revenue. Expanding the formal sector and ensuring more people pay their fair share of taxes is the other crucial part of reducing our reliance on foreign loans.
Global economic pressures and trade imbalances add another layer of complexity and hardship. Uganda isn’t operating in a vacuum—we’re part of a global economy that’s constantly changing to the extent that we will have to strategically plan and ally our economic ties.
Is It Time for Uganda to Go Solo?
The USAID freeze has shown us just how vulnerable we are when we depend too much on foreign aid. While external funding has truly played a big part in our development, it’s clear that relying on it isn’t sustainable in the long run, especially since we can’t guarantee that external aid will keep flowing—the USAID freeze at least teaches us that much.
Other countries have managed to reduce their dependence on foreign loans and thrive, there’s no reason Uganda can’t do the same. But it will take more than just good intentions—it will require solid policies, good governance, and a commitment to building a strong, self-sufficient economy.
To wind this up, while the freeze on American aid was but a political move in America, for the rest of the dependent nations like Uganda, it was a reality check—we simply can’t rely on foreign help as a major source of well-being. Yes, foreign loans and aid have helped us get where we are today, but they’re not a sustainable crutch. Perhaps it’s time to rethink our approach, invest in homegrown solutions, and build an economy that can stand on its own.
Written by Andronicus Enoch M.
