The budget faces a steep financing mountain

Government plans to spend Shs72.4 trillion in the next financial year, which starts in July.

Nearly half - Shs29.5 trillion – will go towards Development Plan Implementation (DPI), which Secretary to Treasury Ramathan Ggoobi says seeks to fix old mistakes - poor coordination, underfunding, and exclusion of vulnerable groups such as women, youth, and those hit by climate change.

More importantly, it pledges smarter planning, better data use, and tighter accountability.

But the budget sends mixed signals. Treasury Operations is facing a 40 percent cut, URA and Ubos have also received less than requested, raising doubts on how government plans to boost tax collections while slashing funding towards tax collection and planning. 

The National Planning Authority, central to evidence-based budgeting, did not survive cuts as well. 

Yet embassies set to shut by 2027/28 still get full funding. For the common man, the bright spots lie in allocations to key sectors such as transport (8.8 percent) and private sector development (3.7 percent), while health and skills training have nearly 16 percent.

But sectors such as manufacturing and tourism have less than 1 percent.

Thus, while some parts of the budget may smooth the common man’s daily ride, others leave the engine sputtering.

Uganda’s budget dilemma

The economy isn’t just navigating a storm - it’s trapped in what public policy expert Jane Nalunga calls a “polycrisis.”

Climate shocks, rising debt, and global protectionism are piling up. And continued reliance on exporting raw goods while importing finished ones keeps the country on a treadmill.

Internally, reliance on borrowed cash is deepening long-term fragility. By December 2024, the public debt had hit Shs106.97 trillion - split between domestic and external loans.

Now, repayments are crowding out social services. Interest payments alone are expected to consume 40 percent of every tax shilling collected next year, which means there is less left for investment in growth sectors such as health, education, and infrastructure.

Big bets - and bigger questions

The 2025/26 budget tries to strike a balance. Human capital development receives Shs11.4 trillion and governance and security Shs9.9 trillion - a combined 30 percent.

But nearly Shs10 trillion for security? That suggests unease over elections, and volatility, while a largely needy road and transport infrastructure only gets Shs6.3 trillion.

The glaring omissions

Manufacturing, which could power things, create real jobs and reduce the trade deficit, gets just Shs311b, while tourism, a major job and forex source, gets just Shs427b. Technology and innovation? Less than 1 percent.

Private sector development gets Shs2.7 trillion- not small - but not bold either, while the justice system, Parliament, and public sector transformation get enough to function, but not enough to reform.

The cost of playing it safe

This budget whispers caution. It nods to stability. But it doesn’t shout ambition because it leans more toward maintenance than momentum. It’s not reckless - but it’s not future-facing either.

And therein lies the risk. Instead of unlocking young people, the budget is playing it safe and praying that global shocks don’t visit the country.

Plans vs payouts

The gap between Uganda’s dreams and its budgetary decisions is widening. The National Development Plan III promised to supercharge industrialisation and drive job creation through Agro-Industrialisation, Tourism, Mineral Development, and Oil & Gas. 

But these priorities received just Shs3.03 trillion - only 2.2 percent of the entire budget, which casts doubt on the plan to grow the economy tenfold, from $50b to $500b by 2040.

Debt-driven arithmetic

Maureen Wagubi, the Institute for Social Transformation executive director, puts it bluntly: “We have got a working budget - yes - but 40 percent of it is funded by loans.”

“What does that mean for us as citizens? And how do we reorganize ourselves to deal with it?” she wonders.

Of the Shs72.4 trillion planned for the 2025/26 financial year, nearly Shs26 trillion is already earmarked for debt-related payments - Shs10 trillion to roll over domestic loans, Shs11 trillion in interest, and Shs5 trillion in principal repayments.

That’s over one-third gone. For instance, by December 2024, of the Shs30 trillion disbursed, Shs20 trillion went to debt repayment, while a larger part of the balance went to governance and security.

The bottleneck?

Uganda’s budget is more or less a spending plan. Of the Shs72.4 trillion headline figure, only Shs36.8 trillion is expected to come from domestic taxes. The rest? Loans and grants.

But even borrowed money is poorly used. By the end of 2023, Shs14.3 trillion ($3.78b) had remained undisbursed – loans that sit idle while taxpayers foot the bill in commitment fees.

Yet, budgeted projects such as the Greater Kampala Metropolitan Transport Project, approved in 2020, and the Jinja Expressway, which was to start in 2018, for which some of the undisbursed loans were secured, have been abandoned.

Ministry of Finance’s own data shows Uganda absorbs only 35 percent of the funds it borrows externally, while the rest is caught in bureaucratic knots, misaligned priorities, or political manoeuvring.

The Auditor General has been flagging abandoned projects year in year out, but even where systems have been put in place to mitigate the problem, the wastage is just escalating.

Steven Alor, the UK’s Foreign, Commonwealth & Development Office economic advisor, says: “That is not just inefficiency – it is fiscal indiscipline. Some call it corruption.”

A budget under pressure

The Shs72.4 trillion budget faces a steep financing mountain. Domestic revenue is expected to cover only Shs37.3 trillion, forcing reliance on loans to plug the gap.

However, much of this borrowing is short-term commercial debt with high interest rates — a clear risk to fiscal sustainability.

Revenue projections themselves raise eyebrows. Economist, debt and tax policy analyst Aloysius Kittengo cautions: “We need real data to inform what we’re supposed to generate.”

The tax regime heavily favours indirect taxes like value added tax (VAT) and excise duty - easier to collect but regressive in impact.

The challenge is compounded by widespread tax exemptions that are rarely evaluated.

“We should only offer tax breaks where foregone revenue yields jobs, innovation, and value chains,” Kittengo says. 

An open budget, a closed pipeline

Uganda’s budgeting has won global applause for transparency. According to the 2023 Open Budget Survey, the country leads East Africa and ranks 44th globally for budget openness.

Budget documents are published on time, stakeholders are consulted, and Parliament engages. But transparency ends where implementation begins.

Lukwago calls it the “missing middle.”

“The process may look open, but once the money hits the pipeline, it becomes extremely opaque,” he says. “That’s where things fall apart.”

Grappling with execution

Despite notable reforms, Uganda’s budget system remains riddled with persistent bottlenecks that sap the impact of public investment. 

“We don’t need to implement all projects at once. But if we approve one, can it be implemented on time?” he wonders. 

Government has lately displayed lofty development goals, yet its capacity to deliver is far limited.  

On this, Alor wants Ugandans to hold government accountable, especially when the visible returns on their tax contributions remain elusive.

Researchers also want government to reform tax policies such that revenue forecasting is grounded in solid economic data, rationalised tax incentives, alignment of budget planning with sector realities, and scaling export initiatives beyond the traditional tax base.

Without these, they worry about Uganda’s risk of falling prey to an endless cycle of borrowing to cover recurring deficits, undermining fiscal stability.

“We need realistic data and a tax policy that generates not just revenue, but tangible economic value,” Kittengo says. 

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