Uganda projects public debt will surge to nearly half its annual economic output by June this year, driven by fresh borrowing to fund financial stimulus packages for its Covid-hit economy.

The east African country's debt is seen rocketing to 49.9% of GDP by end-June, up from 41% the same month last year, according to a Ministry of Finance 2021/2022 fiscal year budget planning paper seen by Reuters on Thursday.

The paper said the increase was due to a "need for extra borrowing to cover for both the revenue shortfalls and the Covid-related expenditure needs".

Total public debt amounted to $15.27-billion at the end of June 2020, up from $12.55-billion a year earlier.

"As the government continues to support economic recovery through provision of the economic stimulus package to various sectors, debt is projected to increase further over the near term amounting to 49.9 percent of GDP by end June 2021."

The World Bank projected Uganda's economic growth in 2020 would plunge to as low as 0.4% from 5.6% the previous year, battered by the impact of Covid-19.

Uganda's opposition and the IMF have in recent years expressed unease about the ballooning public debt and potential repayment problems.

The government of President Yoweri Museveni, seeking to finance its infrastructure construction programme and shore up political support, has secured large credit lines from China over the last decade.

According to the budget paper, Uganda's debt will peak at 54% percent in the fiscal year ended June 2023 before starting to decline.

Economic growth, the paper forecasts, will be between 4 and 5% in the fiscal year starting July helped by "expected recovery in aggregate demand following government interventions in reviving private sector activity."

Last year the central bank said Uganda's surging public debt was becoming a drain on public resources that could otherwise be used to finance development.