Uganda’s fiscal position came under pressure in August 2025 after the government recorded a Shs461.57 billion revenue shortfall, raising questions about its ability to meet ambitious revenue targets.
According to the Performance of the Economy Report for August 2025, total revenues amounted to Shs2,587.94 billion against a target of Shs3,049.51 billion, leaving a shortfall of Shs461.57 billion.
Both domestic revenues and grants were below their respective targets.
Tax revenue collections, however, grew 7.6% compared to the same period last year, indicating some resilience amid underperformance.
The August shortfall contrasts with July 2025, which saw a revenue and grants surplus.
Total receipts in July amounted to Shs2,537.77 billion, exceeding the target of Shs2,459.96 billion, largely due to Shs168.21 billion in grants received but initially not included in the plan.
Domestic revenues in July were slightly below target, with non-tax revenues performing at 63.6% of the planned figure.
Government expenditure further illustrates fiscal strain. In August, spending totaled Shs3,149.07 billion, 2.1% above the programmed Shs3,083.87 billion, partly due to expenses meant for July being effected in August after delayed budget processes.
Expenditure on non-financial assets such as roads and bridges was Shs418.93 billion, below the Shs553.14 billion projected.
By comparison, July expenditure was Shs3,619.60 billion, falling short of the plan by Shs155.02 billion.
Non-financial asset acquisition exceeded expectations at Shs377.41 billion, mainly due to higher disbursement to the Investment for Industrial Transformation and Employment (INVITE) project.
Despite fiscal pressures, Uganda’s external sector delivered a bright spot. Merchandise exports grew 53.6% year-on-year in July 2025, rising from $812.69 million in July 2024 to $1,248.12 million.
Coffee, gold, sugar, base metals, crude oil, and horticultural products drove this growth.
Merchandise imports also rose 47.3% to $1,544.94 million, attributed to higher private sector imports in both oil and non-oil categories, alongside marginal increases in government project-related imports, reflecting rising domestic demand and oil infrastructure investment ahead of commercial production in 2026.
The contrast between revenue shortfalls and export growth underscores Uganda’s economic balancing act.
Economists warn that without strengthening non-tax revenue, broadening the tax base, and plugging leakages, shortfalls could persist, forcing higher borrowing or cuts in expenditure.
Sustaining export growth will require competitiveness in coffee, gold, and oil, while also diversifying into value-added products.
As the government targets Shs36.8 trillion for FY 2025/26 and prepares for Shs40.1 trillion in FY 2026/27, the August shortfall serves as a cautionary signal: Uganda must balance fiscal ambition with economic realities to maintain sustainable growth.
