Mukunda: We are worried about Uganda’s rising debt 

What do you like about the budget? 
We commend the focus on domestic resource mobilisation and avoidance of new taxes. The government is opting to broaden the tax base rather than deepen it, with efforts to integrate the informal sector into the tax regime. 

We also applaud the continued investment in the education and health sectors, with the Human Capital Development programme’s budget increased to Shs11.4 trillion from Shs10.2 trillion in the current FY2024/25, and the increased commitment to clearing domestic arrears, with a significant jump from Shs200 billion in FY2024/25 to Shs 1.4 trillion in FY2025/26 — a 600 percent increase. 

The Shs2.2 trillion allocation to the construction and rehabilitation of national roads and bridges is commendable. Also, the Shs169 billion allocation to the Contingencies Fund is notable, though still insufficient to address the expected Shs2.1 billion deficit. Moreover, we welcome the Shs1.78 trillion earmarked for household income and micro-enterprise development, including: Parish Development Model (PDM) allocation of Shs1 trillion. 

We also took note of Women Enterprises allocation of Shs231 billion, Uganda Development Corporation budget of Shs147 billion, Special Grants for PWD of Shs121 billion and Emyooga SACCOs allocation of Shs100 billion.  We also like allocation for Microfinance Support Centre in the tune of Shs76 billion, Youth and Women Participation allocation of Shs23 billion, funding of Shs5 billion for Older Persons and the Jua-Kali Enterprises budget of Shs3 billion all are commendable. 

What don’t you like? 
We are deeply concerned about the rising debt burden. Debt servicing alone will consume Shs26.84 trillion which is about 37 percent of the budget, more than the combined allocations to health and agriculture.

Specifically, this substantial chunk of the budget will go towards: Interest Payments to a tune of Shs11.33 trillion which about 15.7 percent from Shs9.06 trillion in FY2024/25. 

Then there is the domestic refinancing taking Shs10.03 trillion, translating to about 13.9 percent. Then there is external debt repayment (amortisation) taking Shs4.99 trillion which is about 6.9 percent from Shs3.14 trillion in FY2024/25. Then there is domestic debt in the tune of about Shs493 billion, making about 0.7 percent. This unsustainable allocation reduces fiscal space for critical investments in service delivery and infrastructure.

The Ministry of Finance does not believe that the 2025/265 budget is debt-heavy. What is your take?
We respectfully disagree. 
The facts are clear: debt servicing takes up 37.2 percent of the entire budget. Moreover, domestic interest payments alone will account for 25 percent of total revenue, far above the Charter for Fiscal Responsibility (CFR) threshold of 12.5 percent. Additionally, the overall fiscal balance excluding grants to non-oil GDP is projected at -6.5 percent, exceeding the CFR ceiling of -3 percent. 

Uganda’s public debt has surpassed Shs106 trillion, and the pressure it exerts on development spending is undeniable. The failure to effectively utilise the borrowed funds witnessed in the previous years is a testament to how critical the situation is. However, if the oil revenue comes through, we hope to continue fiscal consolidation, reduce leakages, and avoid wasteful spending, then we can have more resources available to service the debt.

Compared to the previous budget, 2024/25, how different or similar is the coming budget?
While both budgets face fiscal pressure, the FY2025/26 budget reflects stronger expenditure controls and a deliberate move to reduce external borrowing. The total budget for FY 2024/25 and 2025/6 is almost the same, Shs72.14 trillion and Shs72.37 trillion, respectively. 

However, local government allocations remain stagnant, with Shs5.7 trillion (7.7 percent) in FY2025/26 down from Shs5.9 trillion in FY2024/25 — a Shs197 billion cut (6.7 percent). Meanwhile, the central government’s allocation has grown to Shs34.65 trillion. Structurally, the budget is still dominated by recurrent spending, which takes Shs22.4 trillion (54 percent), compared to Shs18.7 trillion allocated for development.

Will the 2025/26 budget facilitate business? 
The 2025 budget presents opportunities to support trade and business in Uganda. For Example, the Shs1.4 trillion allocated for the clearing of domestic arrears will inject liquidity into the private sector. This is coupled by infrastructure investments like the Shs2.1 trillion for the Standard Gauge Railway and Shs2.2 trillion for road rehabilitation and construction. Allocations have also been made to support the manufacturing and industry sector through the industrial parks and export zones to the tune of Shs90 billion. 

Additionally, the new tax reforms, which provide for the exemption of startup businesses established by a citizen for the first 3 years from tax, the capitalisation of the Uganda Development Bank and the Agricultural Credit facility, as well as other initiatives for boosting household income, showcase the government’s commitment to support the business community. 

Whereas this is all commendable, the expected increase in domestic borrowing from Shs8.9 trillion in FY2024/25 to Shs11.38 trillion in FY2025/26 threatens the survival of businesses, as this is an indicator that borrowing from commercial banks is most likely to be costly for Ugandans. Currently, lending rates average at 18percent, which is a critical factor hindering business expansion and undermining the sector’s ability to drive national output through the job creation axis. 

 Does it have the potential to spur economic growth?
Uganda’s economy is projected to grow by 6.4percent at the end of FY 2024/25, and peak at 7 percent in FY 2025/26, and expand the GDP to $66.1 billion. Targeted interventions like capitalization of the Uganda Development Bank (UDB), Shs 2.7 trillion to the private sector development program, and the increased tourism budget by Shs138 billion from Shs289.6 billion to Shs427.5 billion provide a favourable growth outlook. This is in addition to a stable macroeconomic outlook, which is comprised of low and stable inflation below the target of 5 percent, currency stability, and competitiveness of Uganda’s products, among others, which provides room to achieve higher growth rates.

Are the priorities of the budget speaking to the common aspiration of the citizen?
Citizens, in most cases, concern themselves with issues related to social services such as good health, education, and improved incomes and welfare. For FY2025/26, the government has prioritised the human capital development programme, which entails the health, education, and social development sector taking up to 15.8 percent of the approved budget. 

Particularly Shs65.55 billion has been allocated to the construction and equipping of the Uganda Heart Institute, while Shs42billion has been allocated in infrastructure development at Uganda Cancer Institute.  Another Shs116.94 billion was allocated towards rehabilitation and construction of the General Hospital and Shs30.75 billion allocated for the establishment of Regional Oncology and Diagnostic Centres in Arua, Mbale, and Mbarara.

How can this budget work for the population? 
Beyond planning, there is a need to ensure the enforcement of fiscal/revenue discipline and accountability during the budget implementation. But also, the government needs to ensure popularisation of the wealth creation programs and the importance they hold in transforming the lives of Ugandans.  FY2025/26 comes at a time when the country is commencing the implementation of the NDPIV.

To avoid the challenges faced during the previous plans, there is a need to improve transparency, accountability, and ensure that funds are used effectively. Additionally, citizens have a critical role to play in ensuring the effective implementation of this budget by monitoring expenditures and holding their leaders accountable.