The 2026/27 national budget allocated Shs 2.26 trillion to the Agro-Industrialization Programme.
A significant share of this budget is earmarked for irrigation and water-for- production infrastructure to shield farmers from the impact of climate variability on agricultural output. Uganda’s agricultural calendar has fundamentally changed.
Long rainy seasons have shortened, while the onset of rain has become increasingly unpredictable. For millions of smallholder farmers who depend almost entirely on rainfall, these changes have translated into lower harvests, declining incomes and growing vulnerability to poverty.
According to the Economic Policy Research Centre, average food crop yields declined from 532 kilogrammes per acre in 2014 to just 262 kilogrammes per acre in 2020, a substantial reduction that underscores the urgency of investing in climate-resilient agriculture.
Recognising this challenge, the government introduced the micro-scale irrigation programme in 2020 to subsidise irrigation equipment for smallholder farmers. Under this programme, the government provides funding to every farmer who has the capacity to contribute 25 per cent of the total cost of establishing a solar-powered irrigation system.
According to the ministry of Agriculture, more than 6,220 farmers have benefited since its inception. Yet the Auditor General’s report on micro-scale irrigation (2024) revealed that 42 per cent of the beneficiaries are not smallholder farmers, raising questions about whether the programme is reaching its intended target.
The Auditor General’s report revealed that the average cost of establishing a solar-powered irrigation system is Shs 30 million ($8,300), meaning a farmer must raise approximately Shs 7.5 million ($2,100) before government can provide its contribution.
For most rural households, this amount is simply beyond reach hence, excluding them from benefiting from the programme. This concern was echoed during a national dialogue convened by EPRC in June 2026, where participants observed that very few smallholder farmers were benefiting because of the high upfront costs.
Irrigation service providers, including Davis & Shirtliff, attributed these costs largely to costly imported equipment, which attracts taxes that ultimately increase the price paid by farmers.
Although the VAT (Amendment) Act 2017 provides for exemption to a contractor who supplies services solely and exclusively for the aid-funded project from VAT, the Auditor General’s report revealed that suppliers of small-scale irrigation equipment continued to pay the tax, effectively increasing the cost of the systems.
Beyond making irrigation equipment more expensive, these taxes represent resources that could otherwise support more farmers under the same budget. Financing arrangements present another challenge.
The requirements by the credit institutions like monthly repayment schedules hinder smallholder farmers who rely on seasonal harvests for income from accessing funding for irrigation.
This mismatch between repayment schedules and cash flows discourages borrowing for irrigation investments. In addition, it is likely that most smallholder farmers have never dealt with financial institutions before, implying that they lack information on how to acquire credit financing.
Consequently, uptake of irrigation remains low. According to the ministry of Water, the area under formal irrigation has stagnated at 23,000 hectares since 2020/21 far below Uganda’s target of 1.5 million hectares by 2040.
If Uganda is to achieve the 2040 target, uptake of small- scale irrigation by smallholder farmers is imperative. Government should rethink how to expend this year’s irrigation budget focusing on making small-scale irrigation affordable.
First, central government should clearly communicate to the district local governments to apply the VAT exemption to bring down the cost of micro irrigation equipment. What would have been paid for taxes could benefit more farmers moreover at a cheaper cost.
Second, government should blend its current co-financing modality with the Pay-As-You-Go (PayGo) model used by Mercy Corps to overcome the constraint of high upfront cost. PayGo model allows farmers to make affordable, smaller mobile money payments over time.
By allowing payment using a known and established mobile money system, the model enhances irrigation uptake by smallholder farmers who have never dealt with financial institutions.
Relatedly, the payment modalities should be redesigned to match agricultural realities. Successful examples already exist. Mercy Corps allows farmers to make a modest upfront payment and spreads the balance over several cropping seasons.
Third, government should consider local and manually operated irrigation pumps because they are cheaper than solar-powered pumps. A manual irrigation kit could go for as low as Shs 870,000.
Manual irrigation systems are not only affordable but also have low maintenance for local farmers. In conclusion, the record budget allocation to the Agro-industrialization Programme presents a great opportunity to transform Uganda’s farming sector.
However, its success will partly be measured by whether an ordinary smallholder farmer can afford to irrigate a garden and harvest throughout the year amidst changing weather patterns.
The writer is a research analyst at Economic Policy Research Centre