Every year, like clockwork, the Parliament of Uganda passes the national budget in accordance with the Constitution.
This year’s budget, for the 2025/26 financial year, has seen an increase of Shs 239 billion (approximately $65.1 million), bringing the total to Shs 72.3 trillion ($19.7 billion). What makes this budget particularly significant is its timing—it coincides with national elections, a period typically characterized by high public spending and financial instability.
Predictably, key sectors of the economy have been sidelined in favor of politically motivated initiatives. Controversial programs such as the Parish Development Model and Emyooga have received large allocations of Shs 1.075 trillion ($293.1 million) and Shs 100 billion ($27.2 million), respectively.
By contrast, the private sector—arguably the engine of the economy—has been given a paltry Shs 4.5 billion ($1.2 million) in subsidies. This disparity highlights a troubling pattern of misplaced priorities, where political survival appears to outweigh economic development.
Historically, Uganda’s budgets have underperformed, often requiring substantial revisions through supplementary budgets. Parliament’s own Budget committee has acknowledged the weakness in the planning process, noting that “…projections by government do not seem to be developed through an in-depth and comprehensive process or studies, and this is leading to unreliable or unrealistic budget estimates.”
This systemic flaw helps explain why critical sectors such as the private sector are routinely neglected. Rather than being used as a strategic tool to stimulate growth and improve livelihoods, the budget has increasingly become a political instrument, undermining its credibility and economic impact.
DOMESTIC BORROWING AND DEBT REFINANCING
The understated implications of government’s domestic borrowing and debt refinancing to the economy are concerning. Together they account for a third — Shs 21.3 trillion [$ 5.8 billion] of the budget’s total financing in FY 2025/26. This has negative undertones.
As the government borrows, it raises interest rates in the market for private enterprises. This shifts lending institutions’ focus to lending to government because it is more profitable and less risky. All at the expense of private enterprises accessing credit. In consequence, the cost of credit for businesses shoots up forcing them to scale down, or shut down completely.
And as a result, jobs are lost, and even fewer ones are created inducing slow growth in the economy. Domestically, government borrows by issuing bonds and treasury bills. In this case, only government stands to win because it gets the money it is looking for from the debt market.
Further, its coffers are replenished with revenue from tax levied on these securities of up to 20 percent. Bondholders then have to deal with inflation and a depreciating shilling. In addition, it is more costly to borrow domestically than it is to borrow externally.
In FY 2025/26, government is estimated to spend Shs 10.3 trillion [$ 2.8 billion] on interest payments for domestic debt. In comparison, the treasury will dole out Shs 1.6 trillion [$ 450.7 million] as interest payments for external debt. Domestic debts are more expensive than external debts because, they charge higher interest rates and have shorter maturities.
With regard to debt refinancing: replacing one debt for another with better terms, government is going to create new expenses in fees for setting up the new loans. This will send shock waves in the credit market and raise the borrowing ceiling. For this reason, private enterprises will be alienated from much-needed credit, sequentially suffocating the private sector.
SUBSIDIES
These are the benefits given by government to an industry or business. Subsidies come in the form of payments and tax incentives. They are intended to reduce production costs to make selected sections of the economy competitive.
According to budget draft estimates for FY 2025/26, government, through the ministry of Finance and ministry of Trade is extending subsidies worth Shs 4.5 billion [$ 1.2 million] to private enterprises. While a section of policymakers advise against subsidies, given that they are an expense to government; many governments use them.
Subsidies boost crucial sectors of economies, and, as a result, many businesses have been birthed and even flourished because of them. For instance, MTN in its early stages was supported by the South African government.
Bharti Airtel, which owns Airtel Uganda, was as recently as 2022/23 reported by Global Trade Alert to have received a payment of $54.44 million from the Indian government. MTN and Airtel are two of the biggest taxpayers in Uganda, and the benefits accorded them by their home governments cannot be discounted from their successes.
Uganda’s government does not extend the same courtesy to home-grown businesses. This puts them at a competitive disadvantage because they cannot compete with companies that are subsidised back home.
Ironically, when giving tax incentives, large foreign companies operating in the economy are given top priority over local ones, because of their market size. On account of this standard, local businesses and ideas are buried in their early stages. This is why domestic enterprises have failed to cross over to other markets within the region.
Subsidies can be used to offset the burden of heightened domestic borrowing which pushes interest rates up. Because by lowering banks’ operation costs, and reducing their risk exposure, interest rates are brought down. Government can apply this to combat high borrowing rates.
When contacted for comment on this matter, Ramathan Ggoobi, permanent secretary, ministry of Finance, Planning and Economic Development, and secretary to the Treasury of Uganda, did not respond. Taken together, a thriving private sector is born out of intentional government policy and effort, not chance. It is a definite way to boost household incomes.
Assigning a measly amount as a subsidy to private enterprises in a financial year, does not address the problems at the core of the financial ecosystem. It only shows how indifferent the regime is, to helping local businesses.
Government is more interested in over-funding: State House, the Office of the President, ministry of Defence, and similar votes. Together with matching units dressed up as wealth creation projects. In reality, their primary objective is to enrich and keep the current administration in power. Directly or indirectly.
kidambamark3@gmail.com
May be it’s not even a question of budgeting to fund a private sector vs consumption economics with exotic names e.g. PDM, Emyooga, etc.
You see, the private sector, in absence of a major economic huddle, would need very little assistance/grants because they’re supposed to be profitable anyway. Plus, they also have extra incentives via tax credits on losses and any other softer taxes & certain policies (including monetary) that indirectly lend them extra cash flow. Where government grants are excessive for the private sector, it’s a clear sign of a struggle.
My worry is that Uganda has no social support system and neither are we trying to have one. What if the cash drips via those exotic names turned into limited subsistence with support for job hunts and then government working with the private sector to expand the intake? Wouldn’t that literally transform our citizens overnight and create a better environment instead of looking for handouts? If indeed this is what they decided to pursue, I can guarantee that the real key sectors would start to stand out and you’d notice an improvement including in education/skilling.
The other thing of note is the pathetic supervision or say rogue government workers, be it police, army, judiciary, legislators, medical personnel, teachers, public servants, etc … bribery, corruption, swindling, laxity, everywhere! And inevitably, the power culture with orders from above.
Lastly for now, that things called witchcraft is smearing a curse on Uganda in broad daylight. No amount of heroic praying can reverse things without decisive action. With witchcraft, whatever aspirations come through all these initiatives, they end up in limbo because of the curse. No wonder there’s all this divide and rule stuff to the point that now army men want legal rights to pounce on citizens via court martial for paying them well … and the rank & file, who are in the papers torturing citizens and making all sorts of threats, are also in the papers demanding respect and threatening severe consequences for anyone talking against. You see the curse?
So there you go …