CSBAG warns of debt, election pressures as Uganda heads into 2026 “perfect storm”

December 18, 2025 in Finance, Policy by Editor

CSBAG has warned that rising debt, election-year spending pressures and global shocks threaten Uganda’s growth gains as the country heads into 2026, urging stronger fiscal discipline and accountability.

Uganda enters 2026 facing a convergence of economic, fiscal and political pressures that could undermine recent growth gains unless discipline and accountability are enforced, the Civil Society Budget Advocacy Group (CSBAG) has warned.

Speaking at CSBAG’s end-of-year briefing in Kampala on December 18, Executive Director Julius Mukunda described 2025 as a year of “profound economic contradictions,” marked by strong headline growth but persistent weaknesses in public financial management and inclusive development.

“The major question is no longer whether Uganda can grow, but whether that growth is translating into tangible improvements in the lives of ordinary Ugandans,” Mukunda said.

Uganda’s economy expanded by an estimated 6.3pc in FY2024/25, supported by agriculture, construction, manufacturing and household consumption. Inflation remained within the Bank of Uganda’s target, averaging 3.5–3.9pc, while per capita income rose to about USD 1,263. Progress was also recorded in oil sector development, with over 100 wells drilled across the Tilenga and Kingfisher projects, although first oil has now been pushed to mid-2026.

Despite these gains, CSBAG cautioned that fiscal vulnerabilities are deepening. Public debt rose to UGX 116.2 trillion, equivalent to 51.3pc of GDP by June 2025, while debt servicing now consumes more than 31pc of domestic revenue.

“For every 10,000 shillings collected by URA, over 3,000 shillings goes straight to interest payments,” Mukunda noted, warning that debt has become “a direct threat to service delivery.”

CSBAG highlighted persistent weaknesses in domestic revenue mobilisation, with Uganda’s tax-to-GDP ratio stuck at 14pc, well below regional peers. This, Mukunda argued, has increased reliance on borrowing and exposed the country to external shocks, including renewed global protectionism and aid retrenchment.

The organisation pointed to the disruptive impact of shifting global aid flows in 2025, including the closure of USAID operations and the suspension of some GIZ-supported programmes. These developments, CSBAG said, have widened financing gaps in health, refugee support and governance programmes, while placing civil society organisations under severe strain.

“Uganda’s fiscal position has been tested by global shocks transmitted through aid, trade and finance, revealing how vulnerable we remain when domestic revenue is weak,” Mukunda said.

Social indicators showed modest improvement, with poverty declining to around 20pc and the Human Development Index rising to 0.550. However, CSBAG warned that progress remains uneven, with youth unemployment estimated at 60–65pc and several regions still lagging behind in access to basic services. Delayed releases and rigid conditional grants continue to constrain local governments, which are responsible for frontline service delivery.

Looking ahead to 2026, CSBAG identified election-year fiscal pressures as a major risk. Historically, supplementary budgets increase sharply in pre-election periods, raising concerns about off-budget spending, weak procurement controls and the accumulation of arrears.

“Without restraint, election-year spending can reverse hard-won macroeconomic gains and trigger inflationary pressures,” Mukunda said, calling for tighter fiscal controls and coordination with monetary policy.

CSBAG also warned that Uganda’s status as a regional food basket is eroding, with rising imports of staples such as rice and beans exposing households to price volatility and foreign exchange pressures. Combined with climate risks and election-year spending, this trend could heighten food inflation in 2026.

On oil revenues, Mukunda cautioned against complacency as first production approaches.

“Without robust and transparent public financial management systems, oil revenues risk fuelling corruption and waste instead of long-term development,” he said.

CSBAG urged government to prioritise fiscal discipline, accelerate tax reforms, strengthen oversight of state-owned enterprises and safeguard social spending. Mukunda concluded that Uganda’s challenge is no longer a lack of plans, but execution.

“Without credible budgets and accountability, economic growth will continue to bypass ordinary Ugandans, regardless of how strong the headline figures appear,” he said.