The National Budget Framework Paper (NBFP) for the Financial Year (FY) 2025/26 sets the tone for Uganda’s economic direction under the newly adopted Fourth National Development Plan (NDP IV). The government has outlined an ambitious economic agenda themed “Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding and Broadening Social Services, Digital Transformation and Market Access.” This theme reflects the government’s desire to deepen economic transformation by targeting key sectors that are seen as growth multipliers.
The NBFP presents a macroeconomic outlook that is broadly optimistic, anchored on anticipated economic growth of 6.4% in FY 2024/25, and even higher in subsequent years as the country moves closer to commercial oil production. Inflation is expected to remain within target, signalling a relatively stable macroeconomic environment. However, this optimism is contrasted by an emerging fiscal reality, a significantly reduced resource envelope. The budget for FY 2025/26 projects a total resource inflow of UGX 57.4 trillion, down from UGX 72.1 trillion in FY 2024/25. This 20% reduction in available resources raises critical questions about the government’s ability to finance its ambitious development objectives.
This contraction in fiscal space is largely driven by declines in external budget support, a deliberate reduction in domestic borrowing, lower inflows from the Petroleum Fund, and scaled-down refinancing efforts. At the same time, statutory obligations such as debt servicing and interest payments continue to consume an increasingly larger share of the budget, thereby reducing the funds available for actual development programming. The discretionary budget, resources that are directly available for program implementation after fixed costs, has also declined from UGX 28.1 trillion to UGX 24.2 trillion.
Sectoral allocations further reflect inconsistencies between policy aspirations and resource commitment. While the Ten-Fold Growth Strategy envisions transformative investments in agro-industrialization, tourism, minerals and oil, science, and technology, the actual budgetary allocation to these sectors is insufficient. Combined, these strategic growth pillars receive only about UGX 2.67 trillion, far below the projected need of UGX 4.7 trillion as envisaged in NDP IV. This underfunding potentially undermines the very strategy that the government seeks to champion.
Additionally, Uganda’s rising public debt stock and the associated cost of servicing this debt raise sustainability concerns. Interest payments alone will account for UGX 9.24 trillion in FY 2025/26, representing over a quarter of domestic revenues. Such high debt servicing levels diminish the government’s capacity to fund core service delivery areas, including health, education, and infrastructure.
