Donor inflows have substantially dropped by at least $ 758.6m in the last two years, falling from as high as $905m to $146.4m in the three months to March. Photo / Edgar R Batte
Bank of Uganda indicates that donor flows in terms of loans and grants have fallen from $905m in June 2023 to $146.4m, which represents a percentage decline of 83.8 percent
The last two years have been difficult for the NGO sector and donor-dependent government projects.
Well, the rain did not start beating donor-dependent organisations or government projects yesterday.
It has been the case for as much as 10 years, with episodes of comebacks, which, however, were dampened by global dynamics such as Covid-19, geopolitical conflicts such as the Russia-Ukraine war, and pushbacks for alleged rights abuses.
However, the position in which the donor-dependent sector finds itself today is unprecedented and threatens to snowball into a deeper crisis that will have far-reaching implications for the wider economy in both the short and long term.
Whereas it had already been difficult, things have become even more difficult, worsened by a series of chaotic aid cuts and revisions that were first pushed through by the Donald Trump-led administration.
Several countries have since announced cuts or a revision downwards in aid, yet many of them form the core of the source of Uganda’s donor support.
For instance, Germany, the second-largest official development assistance provider, has, over the years, cut more than $5.3b of its core development and humanitarian assistance, according to a report by Africa Confidential.
Similar deductions, the report indicates, have been made by France, which plans to cut over $1b this year, and Britain, which has indicated that its aid budget would be slashed from 0.5 percent of gross national income to 0.3 percent by 2030.
Others, such as Sweden, the Netherlands, and Norway, are also planning cuts.
For instance, the Africa Confidential indicates that the Netherlands has set out plans to cut its annual development budget by $2.6b from 2027, reducing the total budget from $6.8b to $4.2b.
The above countries are core sources of Uganda’s donor support, and the cuts are reflected in official and subsistence data.
Story of a deep hole
Whereas it is difficult to estimate the impact of aid cuts on the NGO (non-governmental organisations) sector, data from Bank of Uganda and the Ministry of Finance tell the true story of the deep hole that has been left to fill.
As recent as March, according to the Ministry of Finance, government had planned to receive Shs105.78b in project support or grants for the month.
However, only Shs10.01b came in, which subsequently returned a performance of just 9.5 percent and a shortage of more than Shs95.77b.
The reduction and shortage in March had not been any different in February and January or even in earlier months, in which there has been a pattern of reduced donor flows in terms of grants. For instance, in February, government had planned to receive Shs459.75b in project support, but only Shs193.48b was disbursed, returning a performance of 42.1 percent, while in January, only Shs19.19b was received out of a planned Shs100.59b.
The above figures, therefore, mean that in the three months to March, government struggled with shortages amounting to a combined Shs443.44b.
The shortages speak to many things, including stalled or abandoned projects, increased borrowing, increase in taxes and project deferrals.
Ministry of Finance acting director of economic affairs, Moses Kaggwa, however, says that whereas there have been shortages previously, they have been covered in the 2025/26 budget, with some projects ending, which means that government will require less donor interventions, than before.
“We are done with the budget and presented it to Parliament with no gaps. Some donor-supported projects have ended and are no longer receiving funding. The requirement for donor support could go down because some projects have ended,” he said yesterday.
However, further reviews of official data from Bank of Uganda paint a clearer picture and tell the story of the free fall in donor inflows.
Whether it is a question of no need for the support or just circumstantial, which was difficult to immediately ascertain, by press time, the decline is substantial.
For instance, in the two years between June 2023 and March 2025, donor inflows, according to data from Bank of Uganda, declined by 83.8 percent.
But more revealing is that the pattern of decline has been consistent through the period and has hit an unprecedented rock bottom in the three months to March, falling to just $146.4m, which is way below the average of $365.42m for each of the eight quarters.
Bank of Uganda further shows that donor flows have fallen from $905m in June 2023 to $146.4m, which represents a percentage decline of 83.8 percent.
After inflows had increased from $599.4m in March 2023 to $905m in June 2023, they subsequently declined by 74 percent to $234.9m in the three months to September 2023.
However, in the subsequent quarter, there was a recovery to $284.6m in the three months to December 2023, before increasing further to $355m in March 2024.
Details further indicate that the pattern of decline was again recorded in the three months to June 2024, in which inflows declined to $299.9m, but subsequently rose to $340m and $357.6m in September 2024 and December 2024, respectively before registering a historical drop to $146.4m in March 2025.
Status of Donor inflows in two years
Period | Inflows |
June 2023 | $905m |
September 2023 | $234.9m |
December 2023 | $284.6m |
March 2024 | $355m |
June 2024 | $299.9m |
September 2024 | $340m |
December 2024 | $357.6m |
March 2025 | $146.4m |
The Ministry of Finance did not explain the declines, but it is highly probable that inflows have been impacted by donor cuts, especially by core source countries in Europe and the Americas.
Dr Fred Muhumuza, an economist, yesterday said that the declines are largely due to the shuttering of USAID in February and the Democratic Governance Facility, which officially closed in Uganda in June 2023.
However, he argued that whereas Ministry of Finance had claimed that it had closed the gaps in the upcoming budget, it is difficult to close such gaping budget holes without substantially cutting wasteful expenditure and increasing taxes.
Such declines, he noted, are likely to result in slackened growth, reduction in demand, and a progressive increase in taxes.
“We can't plug the gap except by cutting spending. It will reduce demand, growth, and taxes, among others,” he said.
However, the events in Europe and the Americas offer an opportunity for countries China, India, Saudi Arabia, South Korea, Qatar, Turkey, and the United Arab Emirates to step up aid programmes in ways that are far more targeted to their commercial and geopolitical interests.
According to the Africa Confidential report, aid budgets to Africa peaked at more than $230b in 2023, which is likely to be a high-water mark.
