How Uganda plans to spend Shs72.4tn

Navigating growth ambitions amid debt rising for the FY 2025/26

COVER STORY | JULIUS BUSINGE | Uganda’s Parliament has approved a national budget of Shs72.4 trillion (approximately US$20 billion) for the fiscal year 2025/2026 (July-June), marking a slight increase from the previous year’s Shs72.1 trillion. Finance Minister, Matia Kasaija is set to present the budget to parliament on June 12 and provide more details on where the money will be used.

Initially, the Ministry of Finance had proposed a reduction to Shs66 trillion, but adjustments were made to accommodate rising inflation and the escalating costs of infrastructure and service delivery. This budget reflects the government’s strategy to stimulate economic growth through sustained investments in infrastructure, social services, and agriculture, while addressing concerns over rising public debt and fiscal sustainability.

Of the total budget, Shs37.2 trillion is expected to be generated domestically through taxes and fees. An additional Shs11.3 trillion will be borrowed locally, and Shs11.32 trillion will come from external loans and grants tied to development projects.

Notably, Shs10.02 trillion is allocated for refinancing existing debts, essentially using new loans to pay off old ones. Furthermore, Shs11.33 trillion is designated for interest payments alone, indicating that a significant portion of Uganda’s resources will be used to manage debt rather than finance new development initiatives.

Budget priorities

The budget prioritizes Development Plan Implementation, which encompasses infrastructure, industrialization, and service delivery, receiving Shs29.5 trillion—nearly 41% of the total budget.

Human Capital Development, including health and education, has been allocated Shs11.4 trillion. The security sector remains a major focus, with Shs9.9 trillion allocated, surpassing the allocations for transport, agriculture, and health. Infrastructure development continues to be a significant investment area, with Shs2.2 trillion directed toward roads and Shs2.175 trillion earmarked for the long-awaited Standard Gauge Railway.

Despite efforts to broaden the tax base, the government faces structural challenges in mobilizing adequate domestic revenue. The Bank of Uganda reports that the country’s tax-to-GDP ratio remains at approximately 14%, below the regional average of 18-20%, limiting the fiscal space to finance ambitious development programs without resorting to borrowing.

The 2025/26 budget seem to align with Uganda’s National Development Plan IV (NDP IV), focusing on increasing household income and fully mobilizing the economy through agriculture and other sectors. Key budget priorities include the Parish Development Model (PDM), Emyooga, and the construction of the Standard Gauge Railway and roads.

Parliament has approved slightly over Shs1.03 trillion for the PDM and Shs100 billion for Emyooga; Shs3 billion is earmarked for Juakalis, and Shs414 billion has been allocated to the Uganda Development Bank to support local businesses.

Election carrot

As Uganda approaches the 2026 general elections, the government is intensifying efforts to implement flagship programs like the PDM and Emyooga, aiming to transition millions of households from subsistence farming to active participation in the money economy. President Yoweri Museveni has been actively monitoring the progress of these programs and is expected to highlight their successes during his campaign for another term.

However, the budget also includes domestic debt arrears amounting to Shs13 trillion, which are exerting pressure on the economy.

Key sector allocations in the FY2025/26 budget include Shs13.8 trillion for infrastructure and transport to enhance regional connectivity through roads, railways, and airports; Shs5.9 trillion for education to improve access and quality across all levels; Shs5.7 trillion for health to bolster service delivery, immunization, and health infrastructure; Shs6.5 trillion for security and governance to maintain internal stability and support peacekeeping efforts; Shs1.7 trillion for agriculture and agro-industrialization to drive productivity and export diversification; and Shs2.1 trillion for public administration and social services to strengthen institutional performance, governance, and social protection for vulnerable groups.

The Shs300 billion increase in the FY2025/26 budget compared to FY2024/25, though modest, is significant. Officials from the Ministry of Finance attribute this rise to factors such as inflation and the escalating costs of goods, which have increased expenses related to infrastructure, imports, and service delivery; the scaling up of development projects aligned with Vision 2040—such as the Standard Gauge Railway, Hoima-Tanga oil pipeline, and energy sector expansion; increased recurrent expenditures due to public sector wage growth and recruitment; and the need for higher allocations towards debt servicing amidst escalating repayment obligations.

One of the most pressing concerns accompanying Uganda’s budget is its mounting public debt. As of June 2024, Uganda’s total public debt stood at Shs94.9 trillion (approximately USD 26 billion), up from Shs80.4 trillion in June 2023, according to the latest Bank of Uganda data. The debt-to-GDP ratio is now estimated at 52.1%, exceeding the East African Community (EAC) convergence threshold of 50%. This increase has raised alarms among economists, civil society groups, and international partners regarding the long-term sustainability of Uganda’s debt profile.

Economic experts caution that accumulating debt without corresponding productive investments risks crowding out essential social spending and destabilizing macroeconomic balances. The FY2025/26 budget has allocated approximately Shs18.2 trillion (about 25% of domestic revenues) to debt servicing, reflecting higher principal repayments and interest costs. This allocation limits the resources available for development and social services.

Kasaija’s response

Finance Minister, Matia Kasaija, acknowledged these challenges during a recent parliamentary briefing, stating, “We are committed to maintaining debt sustainability through enhanced domestic revenue mobilization, prioritizing concessional loans, and carefully managing borrowing.”

Several civil society organizations have weighed in on Uganda’s budget outlook, emphasizing the need for transparency, efficiency, and fiscal prudence. In its recent budget analysis, the Civil Society Budget Advocacy Group (CSBAG) praised the government’s focus on infrastructure and social sectors but warned that, “The rising debt levels and a high recurrent expenditure ceiling threaten to undermine service delivery and economic stability.”

The advocacy group called for an urgent need for stricter controls on non-essential spending and improved public financial management.

Similarly, the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda underscored the importance of efficient resource use, stating, “Uganda must deepen reforms in revenue collection and public investment management. Greater transparency and citizen engagement in budgeting processes will be critical to achieving sustainable growth.”

Transparency, accountability, and prompt execution of budgeted funds remain critical pillars for Uganda’s sustainable development. Experts and civil society actors emphasize that unless these principles are enforced, ambitious budget plans will continue to fall short of their intended impact.

Low fund releases and absorption

In previous years, Uganda has struggled with delayed fund releases, low absorption rates, and project implementation bottlenecks. For example, the Auditor General’s reports have repeatedly highlighted cases of idle funds, incomplete infrastructure, and underperformance across ministries and agencies. In FY2022/2023 alone, over Shs1.2 trillion was returned to the Treasury due to poor budget execution.

Such inefficiencies not only waste taxpayer money but also erode public trust in government institutions and hamper service delivery in key sectors like health, education, and roads. “Without timely implementation, even the best-planned budget becomes irrelevant,” says Julius Mukunda, Executive Director of CSBAG.

The 2011 post-election inflation crisis, which followed poorly managed political and public expenditure, remains a stark reminder of the consequences of mismanaged public funds. To avoid repeating past mistakes, Uganda must enforce transparency and fiscal discipline, ensuring that every shilling serves its intended purpose.

As Uganda approaches the 2026 general elections, experts and civil society organizations are urging the government to carefully balance political expenditures with critical investments in public services and infrastructure to avoid repeating past economic pitfalls.

In the aftermath of the 2011 elections, Uganda experienced a significant economic downturn, with inflation soaring to over 30%—the highest since the early 1990s. This surge was largely attributed to excessive government spending during the election period. The resultant economic strain led to widespread public discontent, culminating in the “Walk to Work” protests, which were met with a heavy-handed response from security forces.

CSBAG’s Mukunda emphasized the importance of prudent fiscal management in the lead-up to the elections, stating, “We believe the government can find a way to allocate resources more effectively, ensuring that critical services like healthcare, education, and infrastructure are adequately funded.”

The Electoral Commission has projected that the 2026 general elections will cost Uganda billions of shillings. While ensuring a free and fair electoral process is paramount, experts caution against allowing political expenditures to overshadow essential public services. They advocate for a balanced approach that safeguards economic stability and promotes sustainable development.

As the nation prepares for the upcoming elections, experts says maintaining fiscal discipline and prioritizing service delivery will be crucial in fostering public trust and ensuring long-term economic resilience.

Uganda has successfully maintained inflation at manageable levels over the past few financial years, largely due to the Bank of Uganda’s (BoU) cautious and proactive monetary policy. Throughout FY2023/24 and into FY2024/25, the central bank implemented a tight monetary policy stance, making timely adjustments to the Central Bank Rate (CBR).

In tandem with these monetary efforts, Uganda’s broader economic trajectory has shown strong momentum. The country posted a real GDP growth rate of 6.1% in FY2023/24, up from 5.3% the previous year.

Looking forward, the Ministry of Finance projects growth of 6.2% in FY2024/25, with expectations to rise further to 7.0% in FY2025/26. These optimistic projections are fueled by ongoing infrastructure development, increased activity in the oil and gas sector, and a steady rebound in tourism. Together, these trends signal a positive outlook for Uganda’s economic resilience and transformation.

Key facts & figures

Overall Budget

• Total approved budget: Shs 72.4 trillion (approx. USD 20 billion)

• Increase from previous year: Up from Shs 72.1 trillion in FY2024/25

• Initial Finance Ministry proposal: Shs 66 trillion

Revenue & Borrowing

• Domestic revenue target: Shs 37.2 trillion

• Domestic borrowing: Shs 11.3 trillion

• External loans & grants (project support): Shs 11.32 trillion

• Debt refinancing (paying old debts): Shs 10.02 trillion

• Interest payments: Shs 11.33 trillion

Spending Priorities

• Development Plan Implementation (infrastructure, industrialisation, service delivery): Shs 29.5 trillion

• Human Capital Development (health & education): Shs 11.4 trillion

• Security sector: Shs 9.9 trillion

• Road infrastructure: Shs 2.2 trillion

• Standard Gauge Railway (SGR): Shs 2.175 trillion

Economic Indicators

• Public debt (as of June 2024): Shs 94.9 trillion (approx. USD 26 billion)

• Debt-to-GDP ratio: 52.1% (above EAC threshold of 50%)

• Tax-to-GDP ratio: Approximately 14% (regional average: 18–20%)

• Inflation: Maintained within 5% target range through BoU’s monetary policy

Social & Economic Programs

• Parish Development Model (PDM): Shs 1.03 trillion

• Emyooga fund: Shs 100 billion

• Support for local artisans (Juakali sector): Shs 3 billion

• Uganda Development Bank capitalization: Shs 414 billion

Key Sector Allocations

• Infrastructure & transport: Shs 13.8 trillion

• Education: Shs 5.9 trillion

• Health: Shs 5.7 trillion

• Security & governance: Shs 6.5 trillion

• Agriculture & agro-industrialisation: Shs 1.7 trillion

• Public administration & social services: Shs 2.1 trillion

Debt & Fiscal Pressure

• Debt servicing allocation: Shs 18.2 trillion (approx. 25% of domestic revenue)

• Domestic debt arrears: Over Shs 13 trillion

• Unspent funds returned to Treasury in FY2022/23 due to poor execution: Over Shs 1.2 trillion

Political & Electoral Context

• Projected cost of 2026 general elections: Shs 838 billion

• Experts warn against election-related overspending

• 2011 precedent: post-election inflation exceeded 30%, triggering Walk-to-Work protests