Analysts challenge PDM’s economic Impact in Uganda

KAMPALA, Uganda — Uganda’s ambitious Parish Development Model (PDM), a flagship government initiative designed to boost household incomes, is facing strong scrutiny from economic experts who argue its current design as a “consumption model” will have limited impact on the nation’s overall economic growth.

The critique emerged Friday during a post-budget dialogue hosted by Ernst & Young at the Sheraton Hotel in Kampala, where analysts broke down the UGX72.136 trillion national budget for the 2025-2026 fiscal year. While the budget allocates UGX590 billion specifically to the PDM, its fundamental approach was questioned.

Hamza Ssali Mukasa, a senior manager in the Tax Department at Ernst & Young, was a leading voice in the criticism. He stated that while the PDM aims to improve household well-being and consumption at the family level, “its value proposition for overall economic growth seems limited.”

Mukasa emphasized the need for the government to shift focus towards production-oriented models. He suggested establishing industries in specific zones to create jobs for Uganda’s unemployed youth, arguing that such a production-focused approach would directly contribute to the Uganda Revenue Authority’s coffers through Pay As You Earn (PAYE), Value Added Tax (VAT) and other indirect taxes.

Finance Minister Matia Kasaija, during his budget presentation Thursday at Kololo Ceremonial Grounds, unveiled a budget themed “Full Monetisation of Uganda’s Economy through Commercial Agriculture, Industrialisation, Expanding and Broadening Services, Digital Transformation and Market Access.” He highlighted the PDM as a crucial vehicle for this transformation, noting that over 2.6 million Ugandans have already accessed PDM funding for agriculture, livestock, poultry and microenterprises. The minister added that the system is now fully digitized via WENDI and ZAIDI applications to enhance transparency.

Despite the government’s positive outlook, Mukasa also pointed out that many PDM beneficiaries from the previous financial year had not yet received their allocated funds, stressing the importance of prompt access to resources this year.

Robert Mbaziira, another senior tax manager at Ernst & Young, offered a mixed assessment of the broader budget. He commended the government’s push to broaden the tax register, particularly the mandatory Tax Identification Numbers (TINs) for all Ugandans effective July 1, 2025. While acknowledging this move expands the tax base, he cautioned that including individuals not part of the money economy could necessitate “additional administrative work for the Uganda Revenue Authority.”

Mbaziira also praised the government’s “deliberate efforts,” including increased funding for the Uganda Development Bank (UDB) and various wealth creation initiatives. He singled out the additional UGX500,000 allocated to persons with disabilities under the PDM, calling it a “crucial consideration and…the biggest positive change.”

However, Mbaziira shared concerns regarding the URA’s new requirement for “groupage” consignments by traders, where goods are pooled into a single container. He warned that requiring disaggregation for individual traders could lead to a “bloating of the VAT register,” creating increased administrative burdens for small business owners. He also expressed disappointment with the allocation to the agriculture sector, which contributes over 24% to Uganda’s GDP and employs more than 60% of its population, yet received only about 2.5% of the budget. “I personally believe this is on the lower side,” he stated.

Gideon Nkurunungi, CEO of the ICT Association of Uganda, delivered a stark critique of the budget’s treatment of the information and communication technology sector. He summarized the situation as one where “ICT is Starved and Opportunities Missed.” Nkurunungi stated that ICT received approximately 0.5% (UGX381.75 billion) of the UGX72 trillion budget, significantly less than the 5.9% allocated to roads.

Nkurunungi lamented the absence of clear funding for critical ICT infrastructure beyond a “5,000km fiber” promise and disputed official internet penetration figures, citing Uganda Communications Commission data suggesting closer to 28% of users. He further argued that bundling ICT under other initiatives, such as the African Union Transition Mission in Somalia (ATMIS), risks diluting its priority.

“Digital transformation needs bold investment in broadband, devices, and literacy NOW,” Nkurunungi asserted, urging a re-evaluation of the sector’s funding.

Despite the criticisms, Minister Kasaija maintained a confident outlook, projecting Uganda’s economy to grow by 7% in the upcoming fiscal year, with per capita income expected to reach $1,324, moving the country closer to middle-income status. He highlighted government efforts to boost domestic revenue, curb smuggling and address corruption at the URA, also detailing significant allocations to health (UGX5.87 trillion) and education (UGX5.04 trillion), and investments in energy, mineral development and tourism infrastructure.