As Uganda gears up for the reading of the 2024/25 national budget this Thursday, budget experts have welcomed the government’s decision to allocate Shs 1.4 trillion for the clearance of domestic arrears, describing it as “a much-needed shot in the arm” for the private sector.
The total budget is fixed at Shs72 trillion, with the Uganda Revenue Authority (URA) tasked to raise Shs 33.182 trillion in domestic revenue.
The clearance of domestic arrears is expected to unlock liquidity for private sector players who have long been burdened by delayed government payments.
Experts argue that this allocation could significantly stimulate economic activity and enhance tax compliance, particularly from local suppliers and contractors who depend heavily on timely government payments.
However, concerns remain about the sustainability of the budget. A staggering Shs 35 trillion deficit looms, and it is anticipated that this gap will be bridged through both domestic and external borrowing, which could introduce an additional Shs 20 trillion in new public debt.
This raises critical questions about the long-term implications of Uganda’s fiscal strategy and whether the budget will truly address the needs of the ordinary Ugandan.
In a panel discussion organised under the 'Spotlight UG' forum, experts explored key components of the proposed budget and expressed concern about Uganda’s growing debt burden. Government interest payments on Treasury Bills are expected to increase from Shs 843.96 billion in 2024/25 to Shs 1.22 trillion in 2025/26, while interest on Treasury Bonds is projected to grow from Shs 7.19 trillion to Shs 8.56 trillion in the same period.
Kenneth Engola, Public Sector & Development Partner Organisations Lead within the Global Markets Department, underscored the risks posed by rising interest obligations and called for prudent fiscal management to avoid crowding out development spending.
Meanwhile, the URA faces an uphill task, with its domestic revenue mobilisation target of Shs 33 trillion set amid an impending shortfalls.
Experts have called for alternative policy options to support revenue generation, including enhancing tax administration, broadening the tax base, and leveraging technology.
Julius Mukunda, a prominent economist and budget analyst, emphasised the importance of transparency and citizen engagement.
“There has been money set aside for Jua Kali (informal sector), now the most important thing is for the Ugandan to ask for accountability for their taxes,” Mukunda said.
The government is also pinning its hopes on anticipated oil revenues, projected at approximately USD 15 billion, to drive economic growth and reduce reliance on debt.
There is optimism that the budget will uplift small and medium enterprises (SMEs) and promote local content, especially in the oil and gas sector.
As the nation awaits the final reading of the budget, all eyes are on how the government will balance its ambitious development agenda with fiscal responsibility — and whether the budget can translate into tangible benefits for the average Ugandan.
