Overview:
The Ministry attributed the drop largely to weaker economic conditions in major remittance source markets, particularly Europe and the Middle East, which affected the earning capacity of migrant workers.
Uganda recorded a decline in both foreign direct investment (FDI) and remittance inflows during the second quarter of the 2025/26 financial year, while tourism earnings posted strong growth, according to the Ministry of Finance’s Post-Election Economic and Fiscal Update.
The report shows that FDI inflows fell by 6.8 percent to $737.8 million, down from $791.88 million recorded during the same period in the previous financial year. However, the Ministry noted that the decline was relatively modest compared to previous election cycles.
FDI had dropped by 8.6 percent in the quarter preceding the 2021 general elections and by a much steeper 30.3 percent ahead of the 2016 elections, suggesting improved investor confidence despite the recent electoral period.
Remittances sent home by Ugandans living abroad also registered a decline, falling by 2.3 percent to $456.22 million from $467.05 million during the corresponding quarter of 2024/25.
The Ministry attributed the drop largely to weaker economic conditions in major remittance source markets, particularly Europe and the Middle East, which affected the earning capacity of migrant workers.
In contrast, the tourism sector delivered a strong performance, with receipts increasing by 13.3 percent to $395.69 million from $349.19 million a year earlier.
According to the report, the growth was driven by increased international arrivals, longer visitor stays, higher spending per tourist and stronger demand for premium leisure travel experiences.
The Ministry said the broader economy remained resilient in the aftermath of the general elections, supported by robust economic growth, low inflation and a stable exchange rate.
Government said it remains focused on strengthening domestic revenue mobilisation, maintaining fiscal discipline, supporting private sector growth and expanding export diversification. It also emphasized ongoing efforts to ensure future oil revenues contribute to sustainable and inclusive economic development.
Meanwhile, government expenditure during the third quarter of the 2025/26 financial year remained below target despite significant spending on election activities.
Public expenditure between January and March 2026 totaled Shs12.282 trillion against a planned Shs13.672 trillion. The Ministry attributed the lower spending partly to the frontloading of expenditure in the previous quarter to finance election preparations and key infrastructure projects.
Total recurrent expenditure amounted to Shs10.5 trillion compared to a target of Shs11.47 trillion, while spending on non-financial assets reached Shs1.78 trillion against a planned Shs2.19 trillion.
Development expenditure was particularly affected by implementation challenges associated with externally financed projects, including procurement delays and difficulties in meeting counterpart funding obligations.
By April 2026, government had spent Shs1.508 trillion on election-related activities. The Electoral Commission accounted for the largest share at Shs1.146 trillion, followed by the Uganda Police Force with Shs347.91 billion and the Uganda Prisons Service with Shs13.75 billion.
Permanent Secretary and Secretary to the Treasury Ramathan Ggoobi said the fiscal deficit for the 2025/26 financial year had been revised downward from 7.8 percent to 7 percent of Gross Domestic Product due to lower-than-expected expenditure, particularly on externally financed projects.
“The successful conclusion of the general elections allows us to continue strengthening the efficiency and effectiveness of fiscal policy to increase productivity and speed up the process of socio-economic transformation in line with government aspirations,” Ggoobi said.
Preliminary figures show that government operations during the January-March quarter resulted in a fiscal deficit of Shs3.74 trillion, lower than the projected Shs4.33 trillion, largely because expenditure remained below planned levels.
Revenue collections, including grants, amounted to Shs8.542 trillion, representing 91.5 percent of the quarterly target and leaving a shortfall of Shs792.51 billion.
While domestic revenue collections reached 97.1 percent of target, non-tax revenue underperformed due to lower receipts from mining fees, royalties and police express penalties.
Tax revenue, however, exceeded expectations by Shs121 billion, driven by stronger collections from taxes on goods and services as well as income taxes.
Grant inflows remained significantly below projections, with government receiving only Shs79.52 billion against an expected Shs620.78 billion, largely due to compliance requirements and delays in meeting project-specific conditions for disbursement.
The Ministry said it is strengthening oversight mechanisms to accelerate project implementation and improve the timely release of grant funding.