With the start of the Financial Year (FY) 2024/25 just two weeks away, Uganda’s government has unveiled a budget totaling more than Shs72.1 trillion. The ambitious financial plan is set against a backdrop of rising debt and economic challenges.
Budget Breakdown
Domestic revenue is expected to contribute Shs32.3 trillion, accounting for approximately 45% of the overall budget. Budget support will add Shs1.3 trillion, about 2% of the total. Domestic borrowing is projected to bring in Shs8.9 trillion, or slightly over 12% of the budget.
Moreover, domestic debt refinancing will reach Shs19.8 trillion, translating to 27.5% of the budget, while project support will add Shs9.5 trillion, making up 13% of the total. In essence, debt financing will cover 55% of the FY2024/25 budget, with domestic revenue covering nearly 45%.
Budgetary Challenges
This substantial budget has raised concerns, especially given the limited time legislators had to scrutinize and debate an additional Shs14 trillion that increased the budget from Shs52.7 trillion to Shs72.1 trillion. Civil society organizations, under the Civil Society Budget Advocacy Group, have expressed worries about the rapid increase in national budget figures. Global rating agency Moody’s recently downgraded Uganda’s credit rating from B2 to B3, signaling higher risk in the eyes of international financiers.
Rising Debt and Fiscal Concerns
Uganda’s public debt reached Shs97.4 trillion by December 2023, according to the Auditor General’s report. The International Monetary Fund (IMF) projects that this figure will rise to approximately Shs110.6 trillion by the end of FY2024/25, raising concerns about debt sustainability. The current debt-to-GDP ratio stands at 53%, surpassing the World Bank’s benchmark of 50%, indicating a high risk of default.
The government plans to borrow an additional Shs8.9 trillion domestically from commercial banks in FY2024/25. Interest payments on loans are set to increase to Shs9.5 trillion, up from Shs8.2 trillion in FY2023/24. Additionally, commitment fees for projects surged by 44%, from Shs77.5 billion in FY2021/22 to Shs112.018 billion in FY2022/23.
Revenue Shortfalls
A preliminary review of the FY2023/24 budget by a team of CSO budget experts revealed that tax revenue collections fell short by Shs876 billion. Additional shortfalls from grants and non-tax revenues increased the deficit to about Shs2.1 trillion, which was financed by domestic borrowing.
Declining Donor Support
Uganda’s financial indiscipline has led to reduced donor support. The World Bank withheld a $1.5 billion loan in 2022 due to concerns over corruption and the Anti-Homosexuality Act. Similarly, the European Union cut its development aid by 20%, and the US government withheld funding for various development projects citing corruption and fiscal irresponsibility.
Budget Priorities
Despite the challenges, the government has allocated funds aimed at stimulating economic growth. Key areas include Human Capital Development with Shs9.6 trillion, Governance and Security at Shs9.1 trillion, and Integrated Transport Infrastructure at Shs5.1 trillion.
Investments in social programs such as the Parish Development Model (PDM), Emyooga, and the Uganda Development Bank (UDB) are also prioritized. In health, allocations include Shs57 billion for the Uganda Heart Institute and Shs38 billion for the Uganda Cancer Institute.
 2024/25 just two weeks away, Uganda's government has unveiled a budget totaling more than Shs72.1 trillion.){kind=link}