Uganda Government’s May deficit widens to Shs3 trillion

Uganda’s fiscal operations for May 2025 resulted in a significantly higher-than-expected budget deficit of Shs 3.15 trillion, reflecting mounting pressures from increased public spending and lower-than-projected revenue collections.

This is according to the latest Performance of the Economy Report issued by the Ministry of Finance, Planning and Economic Development.

The reported deficit—representing net government borrowing—was Shs 776.71 billion higher than the Shs 2.37 trillion that had been programmed for the month. The Ministry attributed this gap to two main factors: higher-than-planned expenditures, especially on grants and procurement of goods and services, and shortfalls in both tax and non-tax revenues.

Revenue Collection Falls Short

Preliminary revenue figures show that total collections for the month reached Shs 2.694 trillion, representing 98.3% performance against the target of Shs 2.741 trillion. While tax revenues slightly exceeded expectations at Shs 2.376 trillion—posting a marginal surplus of Shs 2 billion—non-tax revenues and grants underperformed significantly.

• Non-tax revenue amounted to Shs 177.10 billion, falling short of the Shs 197.75 billion target.
• Grants, primarily project support, registered at Shs 140.92 billion, well below the expected Shs 170.02 billion.

The modest tax surplus was largely supported by higher-than-anticipated petroleum duty collections, under the category of international trade and transactions. These posted a Shs 13.48 billion surplus against a target of Shs 929.46 billion.

Public Spending Surges

On the expenditure side, the government spent Shs 4.52 trillion, significantly exceeding the programmed Shs 4.18 trillion. This translated into a 108.2% performance rate, with the biggest overshoots seen in:

• Grants, which amounted to Shs 1.76 trillion against a Shs 1.56 trillion target—driven by higher transfers to local governments.
• Purchase of goods and services, which hit Shs 988.57 billion, up from the programmed Shs 768.21 billion.
• Net acquisition of non-financial assets, such as infrastructure investments, reached Shs 1.32 trillion, representing a 141.3% performance rate.

Meanwhile, social benefits and certain compensation expenditures fell below projections. Social benefit spending was particularly low, reaching just 65.2% of the planned figure.

Fiscal Pressure Mounting

The gross operating balance, which reflects the difference between revenue and operational expenses before investment in assets, worsened to negative Shs 1.83 trillion, beyond the planned negative Shs 1.44 trillion. The Ministry said this reflects the growing mismatch between revenue flows and expenditure commitments.

The widened fiscal deficit suggests that government may have to rely more heavily on borrowing to bridge the financing gap. It also underlines the fiscal pressure ahead of the 2025/26 financial year, as key expenditure areas—particularly infrastructure and local government grants—continue to strain the budget framework.

Despite challenges, the Ministry expressed cautious optimism that tax revenue performance remains stable and may continue to improve if international trade volumes stay strong and domestic compliance measures are enhanced. However, volatility in grants and donor support, as well as rising operational costs, remain key fiscal risks going forward.