Experts Warn Uganda on Debt as Ambitious Economic Growth Plan Kicks Off

As Uganda officially embarks on an “ambitious” journey to grow its economy tenfold from $53 billion to $500 billion within the next 15 years, starting with the 2025/26 national budget and the fourth National Development Plan on July 1, experts and development partners are sounding a strong cautionary note against unplanned borrowing and persistent fiscal mismanagement.

The warnings come amidst widespread concerns about the country’s approach to budgeting, debt management, and revenue mobilization, issues highlighted during a “High-Level Policy Dialogue on the State of Uganda’s Economy” as part of the National Budget Month 2025/26.

Daniel Lukwago, an economist consultant at the World Bank in Uganda, emphasized the dangers of unstrategic borrowing, stating that lenders are always ready to influence governments into taking loans, regardless of genuine need. He revealed that unplanned borrowing is a primary cause of non-performing or stalled projects, with a woefully low absorption rate of only 37 percent for existing loans.

“Uganda should start budgeting based on the resources it has or is sure of getting, primarily its local revenue collections,” Lukwago advised, pointing out that the Uganda Revenue Authority’s tasked collection of 37 trillion Shillings for the 72 trillion Shillings 2025/26 budget should be the realistic basis for government spending, not expected loans which are liabilities.

The pre-budget dialogue, a collaborative effort between the government, development partners, and civil society, led by tax and trade rights group SEATINI Uganda, aimed to scrutinize and offer recommendations for the nation’s ambitious growth targets.

However, Jane Nalunga, Executive Director of SEATINI Uganda, questioned the relevance of such ambitious growth figures if they don’t translate into tangible improvements in the livelihoods of ordinary Ugandans. “When you say Uganda’s economy will grow by 7 percent, what does that mean to someone in Kasanda? Does it mean health facilities, schools, and roads are there?” she posed, stressing that economic growth must directly lead to better access to social services.

Nalunga also raised concerns about the feasibility of the plan amidst escalating global challenges like climate change, trade wars, and US/China tariffs. She particularly highlighted the “cycle of loans,” noting that a significant portion of Uganda’s proposed budget is allocated to debt servicing. She further criticized the continued export of raw commodities, especially agricultural products and gold, as a missed opportunity for value addition.

Aloysious Kittengo, Program Coordinator at SEATINI Uganda, echoed these sentiments, condemning what he termed “ill-thought-out” policies that often prove contradictory or untenable. He specifically criticized the current incentive regime for investors, which often waives taxes and employs casual workers not on PAYE registers, leading to a loss of both tax revenue and employment benefits. Kittengo urged a review of these incentives, advocating for cost-benefit analyses linked to job creation and the use of local raw materials.

He also stressed the need for thorough initial research and planning to inform budget projections, asserting that current proposals are often unachievable due to a lack of reliable data. Kittengo questioned the basis for the increased revenue collection projection from 33 trillion to 37 trillion Shillings, emphasizing that “if projections are not based on real data, we risk budgeting blindly.”

While civil society organizations like the Tax Justice Alliance have submitted alternative tax proposals, Kittengo lamented the limited time and space provided by the government for their input, claiming their proposals are dismissed for lacking research.

The role of Parliament in budget oversight also came under scrutiny. However, Sulaiman Kiggundu, Director of the Parliamentary Budget Office, defended the legislative body’s performance, stating that MPs fulfill their legal obligations. He emphasized that Parliament’s role is to ensure government strategies are catered for in appropriations and that the budget clearly outlines where funds are allocated across 18 programs.

Kiggundu asserted that the responsibility for tracking, questioning, and demanding accountability ultimately rests with every citizen. He clarified that while Parliament appropriates the budget and monitors public funds, enforcement lies with other government bodies like the police and judiciary. He concluded by stating that Parliament has consistently approved budget requests in a timely manner.

As Uganda braces for its ambitious economic leap, the calls from experts and civil society for prudent financial management, transparency, and a citizen-centric approach to development will undoubtedly shape the discourse around the nation’s fiscal future.