Uganda’s Opposition Warns of “Illusion of Growth” in Scathing Alternative Budget Proposal
Kampala, Uganda – Opposition leaders have unveiled a stark alternative budget for the 2026/27 financial year, accusing the government of masking Uganda’s deepening fiscal crisis behind misleading economic growth figures. The proposal, presented in Kampala this week, warns that more than half of the government’s projected Shs78.2 trillion budget will be swallowed by debt repayments and administrative costs, leaving little for essential public services.
A Budget “Built on Debt”
The opposition’s analysis reveals a troubling reality: 56% of the proposed budget is already locked into debt interest payments, domestic refinancing, and fixed expenditures. This leaves critical sectors like healthcare, education, and infrastructure starved of funding.
“This is the illusion of growth,” the opposition stated. “While the numbers suggest expansion, the money available for actual service delivery keeps shrinking.”
The critique echoes concerns raised during last year’s budget debate, when Parliament approved a Shs72 trillion spending plan similarly dominated by debt obligations. The opposition argues that the government continues to overstate fiscal flexibility while underestimating the risks of excessive borrowing—especially as Uganda races to finance infrastructure projects ahead of anticipated oil revenues.
Shrinking Fiscal Space, Growing Concerns
The government claims to have Shs34.2 trillion in discretionary funds, but the opposition insists this figure is inflated. A large portion, they say, is already tied up in salaries, wages, and statutory payments, leaving minimal room for new investments.
Their alternative budget proposes a more “realistic” Shs71.4 trillion resource envelope, factoring in historical budget shortfalls, unpaid domestic arrears, and expected oil revenues by mid-2026. The proposal mirrors last year’s push for tighter fiscal discipline after repeated supplementary spending disrupted planned allocations.
Audit reports from 2020/21 to 2022/23 highlight persistent failures in budget execution, with discrepancies between approved funds, issued warrants, and actual expenditures. “Budgeting as a tool for economic management has not been effectively utilized,” the opposition noted, calling for better forecasting and stricter implementation.
Mounting Debt: A “Ticking Time Bomb”
Uganda’s debt burden is a central theme in the opposition’s critique. For every Shs1,000 collected in revenue, Shs331 goes straight to loan interest payments—a trend they label a “debt trap.”
The report also highlights the cost of “idle debt,” where the government pays commitment fees on stalled projects. Major infrastructure initiatives like the Kampala-Jinja Expressway and Busega-Mpigi Expressway were cited as examples, with only 30% of borrowed funds reportedly translating into completed work. The rest, the opposition claims, is lost to penalties and inefficiencies.
Similar concerns were raised last year when lawmakers questioned delays in externally funded projects and the rising cost of domestic borrowing, which crowds out private sector credit.
Proposed Reforms: Debt Caps and Oil Revenue Safeguards
To curb the crisis, the opposition outlined key reforms:
- Debt Control: A legal cap limiting interest payments to 20% of domestic revenue.
- Oil Revenue Management: Allocating 30% of future oil earnings to retire high-interest domestic debt via a dedicated sinking fund.
- Reduced Borrowing: Cutting domestic borrowing from Shs8.9 trillion to Shs5.1 trillion.
- Clearing Arrears: Increasing funding to settle unpaid government bills from Shs200 billion to Shs1.4 trillion, easing cash flow for local businesses.
The push to clear arrears builds on last year’s warnings that unpaid obligations were stifling economic activity.
Unrealistic Revenue Targets Risk Hurting Businesses
The government’s plan to boost domestic revenue by 11.5% to Shs41.5 trillion was also dismissed as unrealistic. The opposition warns that aggressive tax enforcement could burden businesses and deter investment.
“This creates a dangerous growth-revenue gap,” the report states, cautioning that excessive taxation could destabilize the economy. Similar concerns arose during the 2025/26 budget debate, where analysts warned that missed revenue targets could trigger mid-year cuts or more borrowing.
Oil Revenues: A Double-Edged Sword?
With oil production set to begin in late 2026, both sides see a pivotal moment for Uganda’s economy. However, the opposition warns that without disciplined fiscal management, new revenues could be consumed by debt rather than driving development.
As Parliament prepares for heated budget debates in the coming months, the opposition’s alternative proposal sets the stage for a clash over Uganda’s economic future—one where fiscal responsibility may determine whether growth remains an illusion or becomes reality.
— Reported by Nexio News
