Uganda plans to sharply cut external budget support in the next financial year starting in July. The Ministry of Finance says the move is part of a wider effort to rely more on money raised at home.
According to the ministry, external budget support will fall by 84.2 per cent. This support mainly comes as loans and grants from development partners.
The government now expects to receive only 330.9 billion shillings, about 92.7 million dollars. In the current financial year, Uganda received about 2.1 trillion shillings.
Focus turns to domestic revenue collection
The finance ministry did not give a detailed reason for the cut. However, it said the government wants to strengthen domestic revenue mobilisation.
Officials say Uganda plans to raise more money through taxes and improved collection systems. In the 2026/2027 financial year, domestic revenues are expected to grow by 9 per cent.
If achieved, this would raise domestic revenue to about 40.1 trillion shillings. The government believes stronger local revenue will reduce pressure on borrowing.
Domestic borrowing also set to decline
Uganda also plans to reduce domestic debt issuance in the next financial year. The ministry says domestic borrowing will drop by 21.1 per cent compared to the current period.
This step aims to slow the growth of public debt. In recent years, debt levels have risen due to heavy spending on infrastructure and budget deficits.
By cutting borrowing, the government hopes to lower debt servicing costs and protect public finances.
Rising debt remains a concern
Public debt remains a major issue for Uganda. A growing share of government revenue now goes toward paying interest and loan repayments.
This limits the money available for health, education, and social services. Reducing borrowing could help ease this pressure.
Economists say the plan will only succeed if the government meets its revenue targets and controls spending.
Oil production offers future hope
Uganda expects to start crude oil production later this year. Officials see oil revenues as a new source of income for the country.
The government believes oil exports could reduce the need for loans and foreign aid. However, experts warn that oil income must be managed carefully.
Poor management could increase waste and corruption instead of supporting development.
Risks remain despite optimism
While the shift toward local funding is positive, it carries risks. Higher taxes or tougher enforcement could strain households and businesses.
Uganda’s economy is still recovering from inflation and global economic shocks. Policymakers must balance revenue growth with economic stability.
A bold fiscal shift ahead
The sharp cut in external support marks a major policy change. Uganda is betting on local revenue and future oil income to fund its budget.
If successful, the move could strengthen financial independence. If not, the government may face tough choices on spending and borrowing.
For now, Uganda is signalling a clear shift toward self-reliance and tighter fiscal discipline.