Uganda Government Plans Significant Spending Cuts and Decrease in Borrowing for Fiscal Year 2025/26
In a move to address rising public debt concerns, Uganda's government is set to reduce spending by over 20% and domestic borrowing by more than 50% for the upcoming fiscal year. This decision comes as ratings agencies like Fitch and Moody's have downgraded the country's credit rating due to its increasing debt burden.
The government attributes its borrowing to driving economic growth, which has outpaced many other African countries since the onset of the COVID-19 pandemic. The proposed budget for 2025/26 outlines total government spending at 57.4 trillion Ugandan shillings ($15.56 billion), a decrease from the current year's planned 72.1 trillion shillings.
A significant portion of the borrowing, around 4.01 trillion shillings ($1.09 billion), will come from the domestic market through Treasury bonds, marking a 53.9% decrease compared to the previous fiscal year. The Finance Ministry has not provided a specific reason for the reduction in spending and borrowing figures.
Notably, funding priorities for the government in the upcoming year will focus on areas such as agro-industrialization, tourism, and mineral resources like petroleum, according to Ramathan Ggoobi, the Finance Ministry's permanent secretary. However, external debt repayments are expected to increase to 4.03 trillion shillings in 2025/26, adding pressure on domestic expenditure.
In summary, the Ugandan government's decision to cut spending and borrowing aims to address concerns over rising debt levels and maintain economic stability. This move could impact various sectors of the economy, including agriculture, tourism, and mining, as well as influence the country's creditworthiness in the global financial markets. Investors and individuals alike should pay attention to how these fiscal measures unfold and consider their implications for investment decisions and financial planning.