Uganda Cuts Spending and Domestic Borrowing in 2026/27 to Rein in Soaring Debt
KAMPALA, UGANDA — Uganda’s Ministry of Finance has announced a UGX 3 trillion reduction in public spending and a significant cut in domestic borrowing for the 2026/27 financial year, marking a policy shift toward fiscal restraint and long-term debt sustainability.
According to official projections, total government expenditure will fall from UGX 72.4 trillion to UGX 69.4 trillion. At the same time, domestic borrowing via Treasury bills and bonds will be slashed by over 21%, reducing interest payments that have ballooned in recent years.
❖ A Fiscal Tightrope
Presenting the adjustments in the latest budget framework paper, Finance Minister Matia Kasaija said the cuts are necessary to reduce pressure on public finances and allow the country to “rechannel funds toward productivity-enhancing infrastructure and industrial transformation.”
“The current interest burden on domestic debt is unsustainable,” the statement read. “We must realign our priorities to avoid crowding out the private sector.”
Domestic debt servicing now takes up nearly 30% of Uganda’s tax revenue, raising red flags with both international lenders and domestic economists.
❖ What Gets Funded?
Despite the overall budget cut, the government has pledged continued funding for key projects, including:
The East African Crude Oil Pipeline (EACOP)
Mineral exploration and refining programs
The standard gauge railway (SGR)
Expansion of industrial parks and export zones
These projects are considered crucial to Uganda’s Vision 2040 strategy, aimed at transforming the country into a middle-income economy through infrastructure-led growth.
❖ What’s At Risk?
While infrastructure remains prioritized, the cutback may affect recurrent spending areas such as:
Public sector salaries
Health and education funding
Local government service delivery
Maintenance of existing roads and facilities
Analysts warn that without efficiency reforms, cuts could reduce access to basic services and fuel discontent.
“Fiscal discipline is essential, but we must also guard against austerity that hurts the most vulnerable,” said economic researcher Dr. Fiona Kalule of the Uganda Economic Policy Centre.
❖ Implications for Citizens and Investors
The reduction in borrowing may reduce inflationary pressure and stabilize the exchange rate. It also improves Uganda’s creditworthiness in the eyes of rating agencies and international investors.
However, with less government borrowing, private banks may experience reduced returns from government securities, potentially altering lending behaviors in the economy.
