URA tax windfall delivers first monthly budget surplus in six months

Uganda’s public finances returned to surplus in June after the Uganda Revenue Authority (URA) posted tax collections far above target, giving the government its first monthly fiscal surplus in six months and ending the 2025/26 financial year on a stronger footing.

New figures released by the Ministry of Finance show that government operations recorded a fiscal surplus of Shs517 billion in June, reversing an earlier projection of a Shs691 billion deficit. It was the first monthly net lending position since December 2025.

The turnaround was largely driven by stronger-than-expected tax collections. URA collected Shs5.8 trillion in June, exceeding its monthly target by about Shs800 billion. The Ministry said the improvement came almost entirely from tax revenue, while non-tax revenue and grants underperformed.

URA Commissioner General John Musinguzi Rujoki attributed the strong performance to increased economic activity, improved tax administration and better taxpayer compliance as businesses closed their books for the financial year.

“The end of the financial year traditionally sees improved compliance, but this was also supported by administrative reforms and enhanced enforcement,” he said.

The June performance helped offset weaker collections recorded during the first half of the financial year, when economic activity slowed during the 2026 General Election period.

According to URA Commissioner for Domestic Taxes Denis Kugonza Kateeba, election-related disruptions affected business operations and made tax enforcement more difficult, contributing to earlier revenue shortfalls.

However, collections strengthened in the second half of the year as commercial activity recovered and the tax authority rolled out compliance measures, including tax amnesty programmes and administrative reforms that encouraged more taxpayers to settle outstanding obligations.

The gains were broad-based, with stronger collections from income taxes, domestic consumption taxes and import-related taxes, reflecting improved business performance, higher consumer spending and increased trade.

Despite the revenue boost, government expenditure remained elevated.

The Treasury spent about Shs3.5 trillion on recurrent expenditure in June, slightly above its target, mainly due to higher spending on salaries and other operational costs.

The increased recurrent spending followed Parliament’s approval of two supplementary budgets during the financial year, including an Shs8.1 trillion package passed in December 2025 and another worth Shs1.1 trillion approved later.

The supplementary appropriations have drawn criticism from budget transparency advocates, who argue that approving large additional expenditures towards the end of the financial year weakens parliamentary oversight and increases the risk of inefficient spending.

Civil Society Budget Advocacy Group Executive Director Julius Mukunda said late supplementary budgets leave accounting officers with little time to utilise the funds while limiting Parliament’s ability to adequately scrutinise the expenditure requests.

“Large supplementary budgets approved towards the close of the financial year create conditions that can undermine accountability because agencies are under pressure to spend quickly,” Mr Mukunda said.

Meanwhile, development spending lagged behind government plans.

Expenditure on non-financial assets totalled about Shs1.8 trillion during June, equivalent to roughly 80 percent of the planned allocation for the month, suggesting that some infrastructure and development projects were either delayed or not fully implemented before the close of the financial year.

The June surplus offers a positive start to the new financial year, although analysts say sustaining the momentum will depend on maintaining strong tax compliance while keeping expenditure growth under control as government pursues its ambitious domestic revenue mobilisation targets.