Uganda is preparing to implement its budget for the Financial Year (FY) 2024/2025, with total planned expenditures reaching approximately Shs72.1 trillion. This budget is set to be funded through various sources, reflecting the government’s strategy to manage fiscal priorities and address national development needs.
The largest portion of funding, amounting to Shs32.3 trillion, is expected to come from domestic revenue sources. This represents about 45% of the entire budget, indicating a significant reliance on internal financial streams to fund governmental activities. Additionally, Shs1.3 trillion will be sourced from budget support, comprising approximately 2% of the total estimated revenues.
The government plans to raise Shs8.9 trillion through domestic borrowing, which accounts for slightly over 12% of the budget. This borrowing is aimed at financing critical infrastructure projects and other development initiatives across the country.
Another substantial component of the budget is Shs19.8 trillion allocated for domestic debt refinancing. This practice involves renegotiating existing loans to secure more favorable terms, which contributes approximately 27.5% to the FY 2024/25 budget. Project support funding is also significant, amounting to Shs9.5 trillion, making up about 13% of the total budget allocation.
The composition of these funding sources underscores Uganda’s reliance on debt financing, which is expected to cover 55% of the FY 2024/25 budget. On the other hand, domestic revenue will fund nearly 45% of the total budget, reflecting efforts to balance financial sustainability with developmental goals.
The budget for FY 2024/25 has been subject to scrutiny and debate, particularly due to a sudden increase of Shs14 trillion following adjustments known as corrigenda. This adjustment raised the budget from an initial Shs52.7 trillion to the current Shs72.1 trillion, prompting concerns about transparency and adequate legislative oversight.
Civil society organizations, under the umbrella of the Civil Society Budget Advocacy Group, have expressed reservations about the substantial rise in budget figures. Moreover, international credit rating agencies, such as Moody’s, downgraded Uganda’s credit rating from B2 to B3. This downgrade reflects concerns among multilateral lenders and financiers regarding Uganda’s financial risk profile, exacerbated by reduced external financing options and a growing national debt burden.
Budget Challenges and Concerns
Uganda’s public debt, as reported by the Auditor General in December 2023, peaked at Shs97.4 trillion. The International Monetary Fund (IMF) predicts that this figure will increase to approximately Shs110.6 trillion by the end of FY 2024/25, raising alarms about the sustainability of Uganda’s debt obligations. The current Debt-to-GDP ratio stands at 53%, exceeding the World Bank’s recommended threshold of 50%, indicating a heightened risk of debt default.
In the upcoming fiscal year, the government plans to borrow an additional Shs8.9 trillion domestically from commercial banks. However, the high-interest payments on existing loans already consume a significant portion of the budget and domestic revenues. Interest payments are projected to rise from Shs8.2 trillion in FY 2023/24 to Shs9.5 trillion in FY 2024/25, reflecting the growing financial strain.
Moreover, commitment fees related to projects under review have increased by 44% from Shs77.5 billion in FY 2021/22 to Shs112.018 billion in FY 2022/23. These financial obligations further constrain budget flexibility and compromise service delivery, diverting substantial revenue towards debt servicing instead.
A preliminary review of the FY 2023/24 budget performance indicates significant revenue shortfalls totaling Shs2.1 trillion as of December 2023. To cover this deficit, the government resorted to domestic borrowing, surpassing the planned target by Shs1.8 trillion. These fiscal challenges highlight weaknesses in revenue collection and financial management practices, posing risks to sustainable budget implementation.
Impact on Development Aid and Economic Outlook
Uganda’s financial discipline issues have led to reduced donor support, impacting critical development aid inflows. For instance, the World Bank withheld a $1.5 billion loan in 2022 due to concerns over corruption and governance issues, including the passage of controversial legislation like the Anti-Homosexuality Act (AHA).
Similarly, the European Union (EU) reduced its development aid to Uganda by 20%, citing concerns over financial mismanagement and lack of transparency. The United States also withheld funding for various projects under the African Growth and Opportunity Act (AGOA), reflecting international skepticism towards Uganda’s fiscal responsibility.
These factors collectively undermine Uganda’s budgetary stability and economic outlook, necessitating robust reforms to restore confidence among international partners and investors.
Sectoral Allocations and Priorities
Despite these challenges, the FY 2024/25 budget allocates substantial resources to priority sectors aimed at stimulating economic growth and improving social welfare. Human Capital Development receives the largest share of Shs9.6 trillion, emphasizing investments in health, education, and overall human resource capacity. This allocation underscores the government’s commitment to enhancing essential services and fostering sustainable economic development.
Other key expenditure areas include Governance and Security with Shs9.1 trillion, Integrated Transport Infrastructure and Services with Shs5.1 trillion, Development Plan Implementation with Shs2.3 trillion, and Private Sector Development with Shs2 trillion. These allocations aim to bolster infrastructure development, governance reforms, and private sector growth, aligning with Uganda’s long-term development objectives.
Civil Society Criticism Mounts Over Uganda’s Shs72 Trillion Budget
Members of various civil society organizations (CSOs) have strongly criticized the Ugandan government for swiftly passing the budget for the 2024/2025 financial year without thorough scrutiny and debate.
The activists pointed out that many crucial priorities were underfunded in the budget, and they expressed concerns over the speedy manner in which the Shs14 trillion corrigenda was discussed and approved on May 16. According to them, this rushed approach did not allow adequate consideration of the budget’s implications, especially for the majority of poor Ugandans who might not directly benefit from its programs.
The government is set to formally present the Shs72.13 trillion budget for the 2024/25 fiscal year tomorrow at the Kololo Independence Grounds in Kampala. However, ahead of the official unveiling, Mr. Julius Mukunda, the executive director of the Civil Society Budget Advocacy Group (CSBAG), held a press conference in Kampala where he criticized the misuse of corrigenda principles during the budget’s passage.
Referring to the Public Finance Management Act (PFMA), Mukunda emphasized that corrigenda should only correct errors unforeseen during the budget finalization process. He pointed out that changes in the draft budget should not add pressure to allocated items, and any proposed adjustments must be supported by proper documentation. Moreover, corrigenda should not be used to request additional resources beyond what ministries, departments, and agencies can transfer to local governments.
Mukunda specifically highlighted the controversial Shs14 trillion corrigenda approved by Parliament, which he argued violated these principles. He cited examples such as funds allocated for land acquisition for industrial parks in Nakibaale, construction of Akibua Stadium, and recurrent expenditures, which he deemed unproductive or unrelated to essential public services.
On May 16, legislators expedited the approval of the Shs14 trillion corrigenda shortly after its presentation by Mr. Henry Musasizi, the State Minister for Finance in charge of General Duties. This swift process resulted in an increase of the initial Shs58 trillion budget estimates to Shs72.13 trillion, raising concerns about the thoroughness of parliamentary oversight.
Shadow Finance Minister Ibrahim Ssemuju Nganda commented on the hurried parliamentary discussion, suggesting that potential mistakes in the budget could arise from the minimal time spent scrutinizing its details.
Jane Nalunga, executive director of the Southern and Eastern Africa Trade Information and Negotiations Institute (Seatini), criticized the budget for failing to align with its stated theme of fully monetizing the economy. She pointed out reductions in the budget allocation for the Ministry of Trade, which she argued would hinder internal trade facilitation. Nalunga also expressed concern over the insufficient support for coffee development despite directives from major buyers like the European Union.
Agnes Kirabo, executive director of the Food Rights Alliance (FRA), raised alarm over the reduction of the Agro-Industrialisation Programme budget to Shs1.6 trillion from Shs1.8 trillion. She emphasized the program’s heavy reliance on external financing and urged the government to increase domestic funding, particularly for extension services and post-harvest handling to support farmers and enhance food security.
