Although Uganda was not one of the largest debtor nations in Africa, by the late 1980s the country had accumulated a significant external debt. By 1980, following eight years of economic decline under President Amin, external liabilities rose to over US$700 million. The Obote government's recovery program produced a further debt increase to US$1.043 billion by 1984. By 1987 Uganda's outstanding external debt stood at US$1.405 billion, representing over half of GDP and nearly three and a half times the level of exports. At the end of 1989 total external debt was US$1.8 billion by late 1990, it was approaching US$2 billion. At the same time, the cost of servicing the foreign debt rose sharply from US$45 million in 1986 to US$70 million in 1987 and an estimated US$139 million in 1988. With Uganda's foreign earnings sharply down in 1987 and declining further in 1988, the debt service ratio also rose from 11 percent in 1986 to 18.9 percent in 1987 and an estimated 56 percent in 1988. If all debt maturities were to be cleared, payments would still absorb almost 60 percent of export earnings. Arrears due in 1989 were estimated at about US$70 million.

In 1988 more than 95 percent of Uganda's debt was official or officially guaranteed, reflecting the country's weak capacity to borrow from private banks. Nearly 83 percent of the debt was concessional, leading to some improvement in the average grace and maturity periods of the debts. Nevertheless, multilateral debts claimed a significant share of the total, and these debts could not be rescheduled. In FY 1987-88, US$170 million in medium-term and long-term debt reached maturity, comprising US$126.4 million in principal and US$43.6 million in interest. Of this total, US$135.7 million, or about 80 percent, was owed to multilateral creditors, the remainder to bilateral creditors.

The Museveni government tried to counteract these problems with a revised loan program. In particular, the government wanted to obtain grants or project-related loans in agriculture, industry, tourism, and energy to promote local productivity. In addition, terms of the new loans averaged twenty-year maturity periods, with five-year grace periods. Museveni was successful in rescheduling and refinancing some old debt. In June 1987, the Paris Club (see Glossary) rescheduled US$113 million in loans to Uganda, and further Paris Club rescheduling took place in mid-1989.

In September 1988, the IMF approved the second-year structural adjustment program of US$39 million, after the Ugandan government cleared roughly US$18 million in arrears to the agency. Britain, France, the United States, Italy, and Israel expressed satisfaction with Uganda's progress under the IMF program and rescheduled approximately US$25 to 30 million worth of debt.

Data as of December 1990