Uganda’s government plans to significantly reduce its spending and domestic borrowing in the upcoming 2025/26 fiscal year, the finance ministry revealed on Friday.
According to a draft budget paper, the government aims to cut overall spending by just over 20%, bringing it down to 57.4 trillion Ugandan shillings ($15.56 billion) from the current 72.1 trillion shillings allocated for the 2024/25 financial year.
Domestic borrowing will also see a sharp reduction, with the government planning to borrow 4.01 trillion shillings ($1.09 billion) via Treasury bonds, a 53.9% drop compared to the previous fiscal year. The finance ministry did not provide specific reasons for the cuts in spending or borrowing.
Uganda’s public debt has been a growing concern, prompting opposition politicians to criticize the government’s fiscal policies. International ratings agencies Fitch and Moody’s have also downgraded Uganda’s credit rating due to the rising debt load.
Despite these concerns, the government maintains that borrowing has been critical in driving Uganda’s economic growth, which has outpaced many of its African counterparts since the COVID-19 pandemic.
Ramathan Ggoobi, Permanent Secretary of the Finance Ministry, emphasized that the government’s future investments would prioritize key sectors such as agro-industrialization, tourism, and minerals, including petroleum. He also noted that external debt repayments are projected to rise, reaching 4.03 trillion shillings in the 2025/26 fiscal year, compared to 3.1 trillion in the current year.
This increase in debt repayments is expected to further limit domestic spending capacity.
