Government gets Shs422bn to expand Uganda Airlines fleet

Government has secured Shs422.26 billion to boost the expansion of Uganda Airlines’ fleet as the national carrier struggles with aircraft shortages and disruptions on key international routes.

The funding forms part of a Shs1.696 trillion supplementary budget approved last year. It will support the purchase of 10 aircraft to strengthen the airline’s capacity and route network.

Uganda Airlines has recently faced pressure due to a small fleet. This has affected long-haul operations and forced the suspension of some routes. The airline operates with few aircraft, making it vulnerable to maintenance schedules and technical faults.

To manage the situation, the airline temporarily leased a Boeing Dreamliner from Ethiopian Airlines to restore long-distance flights. This move highlighted the urgent need to expand the fleet.

The funds were raised through borrowing and are reflected in the Ministry of Finance’s February Performance of the Economy report. The report shows that government recorded net borrowing of Shs1.22 trillion in February, higher than the planned Shs985.85 billion.

The ministry said the increase came from higher spending, including payments towards Uganda Airlines’ aircraft purchase and rising interest costs. Interest payments grew due to early domestic borrowing to meet expenditure demands.

The airline’s plans to expand routes to Europe, Asia and the Middle East have been slowed by the limited fleet. A small fleet reduces flexibility and increases the risk of disruptions when aircraft develop faults.

Officials expect the new aircraft to improve reliability and allow the airline to grow passenger and cargo services.

The development comes as government faces revenue challenges. In February, total revenue and grants reached Shs2.61 trillion, below the Shs2.88 trillion target. The gap of Shs268.63 billion was linked to weak domestic tax collections, low non-tax revenue and delayed grants.

Domestic revenue fell short by Shs180.08 billion due to lower VAT and excise duty collections. Taxes on international trade also missed targets because of reduced imports.

However, direct taxes performed well. They brought in Shs789.87 billion, supported by PAYE, corporate tax and treasury bills. Non-tax revenue stood at Shs127.96 billion, far below the target, while grants reached only Shs41.55 billion.

Government spending in February stood at Shs3.39 trillion. Although slightly below the planned figure, some areas exceeded targets. Grants to other government entities rose to Shs1.107 trillion, partly due to support to Uganda Airlines. Interest payments also increased to Shs1.029 trillion.

The continued borrowing shows government’s focus on growing Uganda Airlines as a driver of trade and tourism, despite ongoing fiscal pressure.