Business 6 May 2026 Daily Monitor (Uganda)
Uganda's Budget Deficit Surges as Spending Outpaces Weak Revenues
Uganda's fiscal deficit expanded to Shs8.29 trillion in the first seven months of the 2025/26 financial year due to higher government spending on wages, infrastructure, and services amid falling revenues and grants. The Bank of Uganda warns of rising debt costs and pressures on private sector credit, though debt remains sustainable with careful management. Source: https://www.monitor.co.ug/uganda/business/finance/budget-deficit-widens-as-govt-spending-overruns-revenues-5449464
Uganda’s government faced mounting fiscal challenges in the first seven months of the 2025/26 fiscal year, with expenditures surpassing revenues and grants, leading to a widened budget deficit.
According to the Bank of Uganda’s State of the Economy report, recurrent spending hit Shs24.13 trillion, overshooting targets by Shs300 billion, driven by grants to local governments, medical supplies, and election costs. Capital outlays reached Shs4.482 trillion, up 71.3 percent year-on-year for infrastructure in transport, energy, and public works, though slightly below plan.
Revenues and grants totaled just Shs20.33 trillion, missing targets by Shs1.841 trillion due to weak tax collections, compliance issues, and lower donor support. This revenue gap, amid ongoing struggles to tax the informal sector, pushed the deficit to Shs8.29 trillion—Shs2.07 trillion over projections—mostly financed by domestic borrowing.
The deficit is forecast at 7.9 percent of GDP this year, exceeding the East African Community’s 3 percent benchmark. Public debt climbed to Shs130.22 trillion by January 2026, a 21.2 percent rise, with interest payments projected to consume 45.3 percent of domestic revenues, or 4.7 percent of GDP.
This crowding out risks private sector access to credit and limits spending on health, education, and agriculture. While debt sustainability holds at moderate risk, the central bank urges prudence, revenue boosts, and oil sector success to narrow the deficit to 3.5 percent of GDP by 2029/30.
Source: Daily Monitor (Uganda)