Uganda switches gears on budget policy agenda

The agricultural sector received a record budget allocation of Shs1 trillion ($275 million) in the financial year 2016/17 in the wake of presidential desires aimed at raising rural economic output. The lifting of Covid-19 pandemic lockdown restrictions in January 2022 gave way to a prime budget focus towards digitisation of the economy and industrial transformation. Other sectors that have previously benefited from top priority budget allocations include energy, healthcare, plus defence and security.

The wave of change surrounding budget policy priorities has witnessed a shift towards a new set of “darling” expenditure areas for the financial year 2025/26, symbolised by ATMS—Agriculture, Tourism, Mining, Innovation, and Science. Economic growth prospects in this sector matrix are largely hinged on the agriculture, tourism, and mining sectors, according to the latest economic data.

The country’s coffee export earnings clocked $1.9 billion (Shs6.8 trillion) by the end of May 2025 on an annual basis- a record high in Uganda’s export history backed by rapid increases posted by international coffee prices since 2023. This figure is close to the value of Uganda’s exports destined for the Common Market for Eastern and Southern Africa (COMESA) recorded last year. Total COMESA exports amounted to $1.92 billion (Shs6.9 billion) in 2024, representing 22.4 percent of Uganda’s export revenues according to Bank of Uganda (BOU) data. The country’s gold reserves bear an estimated economic value of $2 billion (Shs7.2 trillion). Coffee and gold exports collectively account for 58.6 percent of Uganda’s export earnings to date.

Overall, tourism earnings yielded $1.7 billion (Shs6 trillion) last year, spurred by a strong rebound in global travel and tourism activity following the end of the two-year Covid-19 pandemic lockdown period that expired in 2022.
“We expect more financial support towards the agricultural sector going forward. The government invested heavily in Inspire Africa Limited at the beginning of this financial year but we anticipate bigger funding than that going forward. 

There is massive growth potential in the economy. But it requires huge investments in strategic sectors to realise the $500 billion Gross Domestic Product (GDP) dream. International coffee prices are still rising, our coffee exports hit $1.9 billion by the end of May, and there is further room for growth. Though the government allocated Shs13 billion ($3.5 million) for European Union Deforestation Regulations (EUDR) compliance activities in this financial year, we are yet to receive that money. 

A joint contractor was deployed by the national EUDR taskforce to collect comprehensive data on all coffee farmers countrywide and they have covered about 70 percent of them. The private sector partner cleared their project bill but government is yet to pay its share of the project costs. Such a delay might slow down our EUDR compliance efforts. That would mean certain commodities could be locked out of the EUDR market before Election Day,” argued Robert Byaruhanga, managing director of Funzo Coffee Limited.

Uganda’s budget resource envelope for the financial year 2025/26 is estimated at Shs72 trillion ($19.8 billion), while Shs34 trillion ($9.4 billion) will be raised from borrowing operations, according to official data.
“Our budgets are guided by National Development Plans that cover five years. But budgets are short-term items that cover one year, and any gaps between the two are bound to distort policy outcomes. Elections are also a big threat to effective budget implementation. One may hear the president talk about big development plans at a political rally, but the bulk of government resources ends up in consumptive areas during election time! The government has been implementingationalisation of agencies but it is doing things that are likely to increase the government’s staffing levels at the same time. Poverty levels might have dropped while roads have been built, but sustainability is the big question here. Let us assume we had dry weather for more than three months in one year. How many of us would survive?” pondered Musa Mayanja Lwanga, an economist at the International Labour Organisation (ILO) Uganda office.

“We invested a lot of money in roads, health, education, energy and agriculture in the past, but all these things are back on the policy scene. The roads, healthcare and education look bad and our public debt position equally looks bad. So what do we do now? Sustainability of policy gains appears to be our biggest problem now,” observed Dr Fred Muhumuza, a lecturer at Makerere University Business School (MUBS).

Whereas Uganda’s tax revenue collections posted a modest surplus of Shs45 billion ($12 million) in the first three months of 2025, the recent closure of various United States Agency for International Development (USAID) projects across the world has triggered a Pay as You Earn (PAYE) monthly revenue loss of approximately Shs30 billion ($8 million) according to Uganda Revenue Authority (URA) records. This scenario seemingly poses a cumbersome revenue mobilisation headache for Treasury technocrats desperate to contain surging public debt levels.

“The size of the economy is not what it was 10 years ago. That means the government’s expenditure priorities need to change as well,” said Patrick Ocailap, deputy Permanent Secretary at the Finance Ministry.