Uganda records revenue surplus in January

Uganda started 2026 on a strong fiscal footing, with total revenue in January, including grants, reaching Shs3.201 trillion—slightly above the target of Shs3.180 trillion—resulting in a surplus of Shs20.25 billion. The surplus eased the government’s need to borrow to meet public expenditure during the month, the Ministry of Finance, Planning and Economic Development said.

The ministry attributed the performance to higher-than-expected tax collections, which offset shortfalls in non-tax revenue. Net borrowing for the month, or the fiscal deficit, stood at Shs1.771 trillion, well below the programmed target of Shs2.448 trillion. The lower deficit was driven by strong domestic revenue and lower-than-planned government spending.

Tax Revenue Surpasses Expectations
Domestic revenue amounted to Shs3.1 trillion, exceeding the target of Shs2.975 trillion and generating a surplus of Shs154.75 billion. Total tax collections reached Shs3.040 trillion, surpassing the target of Shs2.7 trillion by Shs317.63 billion. The ministry said this strong performance was seen across direct domestic taxes, indirect taxes, and taxes on international trade.

• Direct Domestic Taxes: Collected Shs1.07 trillion, a surplus of Shs70.08 billion, largely driven by withholding taxes from treasury bills and the government’s clearance of tax arrears totaling Shs390 billion.
• Indirect Taxes: Reached Shs989.8 billion, exceeding the target of Shs809.53 billion by 22.3 percent. Value Added Tax (VAT) contributed a surplus of Shs203.65 billion, supported by collections from the manufacturing, agriculture, construction, and services sectors.
• International Trade Taxes: Generated Shs1.075 trillion against a target of Shs1.047 trillion, a surplus of Shs28.38 billion, mainly from the infrastructure levy, import duty, and import levies.
• Non-Tax Revenue: Fell short at Shs89.93 billion against a projected target of Shs252.8 billion, leaving a shortfall of Shs162.88 billion.

Government Spending Below Target
Total government spending in January amounted to Shs4.087 trillion, Shs510.51 billion below the target. The largest shortfalls were in grants to other levels of government and social benefits, totaling Shs808.11 billion—Shs425.29 billion below plan—partly due to system upgrades affecting operations.

Compensation of employees reached Shs463.47 billion, slightly below the target by Shs8.19 billion. Spending on goods and services exceeded expectations at Shs780.23 billion, reflecting higher maintenance costs for roads, election preparations, security, and issuance of national identity cards.

Expenditure on non-financial assets stood at Shs885.78 billion against a target of Shs1.03 trillion. Key investments included land acquisition for transport corridors and road improvements, including the Kampala-Masaka highway, Iganga-Bulopa-Kamuli road, and selected Kampala city roads.

Economic Activity Shows Improvement
Economic activity strengthened in January, supported by higher business output, consumer demand, and employment. The Purchasing Managers’ Index (PMI) was 52.6, signaling expansion, while the Composite Index of Economic Activity (CIEA) rose to 182.36 in December 2025 from 181.86 in November, driven by imports, exports, and mobile money transactions.

The Business Tendency Index (BTI) stood at 55.01, indicating optimism about future employment and demand, though investor confidence based on current conditions was more cautious.

Inflation and Currency
Annual headline inflation in January increased slightly to 3.2 percent from 3.1 percent in December, influenced by higher transport and financial service costs, as well as Energy, Fuel, and Utilities (EFU) prices.

The Ugandan Shilling appreciated by 0.4 percent against the US dollar, trading at an average mid-rate of Shs3,562.14/USD, supported by the weakening of the US dollar and increased foreign inflows from exports and portfolio investments.