Government finances have been squeezed since the World Bank, traditionally a key source of cheap credit for the country, cut lending earlier this year to protest against the enactment of one of the world's strictest anti-homosexuality laws.
In a budget speech in June, finance minister Matia Kasaija said the government intended to borrow 3.2 trillion Ugandan shillings from the domestic market via issuance of treasury bills and bonds.
The government last week asked parliament to approve additional borrowing of 3.6 trillion shillings, in a document seen by Reuters on Tuesday.
The central bank, opposition politicians and government officials say soaring debt service costs have been eating into funds needed to finance critical needs.
The extra borrowing will likely put pressure on interest rates, the ministry said.
"Whereas we cannot pre-determine the level of interest rates for domestic borrowing, it is certain that the rates will move upwards," the ministry said.
"External loans are currently very expensive with interest rates of about 10% per annum on foreign currency. This makes the debt service cost of external loans unsustainable."
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