What Uganda’s FY 2026/27 budget means for taxpayers

Uganda is dreaming big for FY 2026/27. With an ambitious domestic revenue target of Shs 40 trillion, the government is signaling that it intends to turn every productive corner of the economy into a source of measurable growth.

The theme of the National Budget Framework Paper (NBFP) for the coming year is deliberate and forward-looking: “Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding and Broadening Social Services, Digital Transformation and Market Access.”

What this really means is that informal cash transactions, subsistence agriculture, and loosely documented business activity will gradually give way to structured, taxable, and traceable economic operations.

Monetization, in other words, is not just about growth, it is about formalization, and formalization has fiscal consequences.

The domestic revenue target of Shs 40.090 trillion, up from Shs 37.227 trillion in FY 2025/26, reflects more than just arithmetic. It is underpinned by a combination of strong economic growth, a widening tax base, improved tax administration, and reforms in non-tax revenue collection.

Over the medium term, these revenues are expected to rise further, bolstered by new tax policies, stricter compliance, elimination of non-beneficial exemptions, and revenues from the oil and gas sector once production begins.

Uganda’s macroeconomic fundamentals support this ambition. Despite global headwinds from geopolitical tensions to disruptions in supply chains and renewed protectionist tariffs abroad the economy has remained resilient.

Real GDP growth rose to 6.3 percent in FY 2024/25, up from 6.1 percent the previous year, benefiting from strategic infrastructure investments in roads, schools, hospitals, and industrial parks, favorable weather conditions, growing exports, and government interventions such as the Parish Development Model, Emyooga, Uganda Development Bank financing, and the Agricultural Credit Facility.

Inflation remained subdued, with headline inflation averaging 3.5 percent and core inflation at 3.9 percent, comfortably within the central bank’s 5 percent target.

These figures are not just statistics; they reflect a stable environment that allows businesses to plan, invest, and transition into formal compliance without the volatility that often deters economic activity.

Looking ahead, Uganda’s economy is projected to expand by 10.4 percent by FY 2026/27, largely driven by the commencement of oil production, continued investment in priority sectors under the Tenfold Growth Strategy, and development in agriculture, manufacturing, energy, transport, and ICT.

GDP is expected to rise from Shs 251.45 trillion in FY 2025/26 to Shs 290.32 trillion, boosting per capita income and widening the taxable economic base. This projected growth is a critical enabler for the Shs 40 trillion revenue goal, as monetized and formalized economic activity creates naturally taxable transactions.

The preliminary resource envelope for FY 2026/27 stands at Shs 69.399 trillion, slightly lower than FY 2025/26’s Shs 72.376 trillion. While domestic revenues are projected to increase, reductions in budget support, domestic borrowing, and external financing explain the slight contraction in the total envelope.

Specifically, budget support has fallen from Shs 2.084 trillion to Shs 0.331 trillion, while domestic borrowing is expected to decline from Shs 11.381 trillion to Shs 8.953 trillion.

These measures reflect government efforts to avoid crowding out private investment, reduce the debt-to-GDP ratio, and manage the growing burden of interest payments.

Debt service remains a pressing concern. By June 2025, Uganda’s debt-to-GDP ratio had reached 51 percent, exceeding the 50 percent ceiling in the Charter for Fiscal Responsibility.

Interest payments are projected at Shs 12.735 trillion, or 30.2 percent of total revenues, far above the sub-Saharan Africa median of 12 percent. Of this, Shs 10.716 trillion will service domestic debt, while Shs 2.019 trillion will cover foreign obligations.

High interest burdens constrain discretionary spending, leaving fewer resources available for sectors that drive growth and social development. The government’s approach, therefore, emphasizes concessional borrowing and fiscal prudence while gradually reducing reliance on commercial debt.

For taxpayers, the ambitious Shs 40 trillion target carries real implications. Large corporations, with established compliance systems, will face more structured reporting, tighter audits, and data verification. SMEs may feel more pressure as digital reporting, payroll compliance, and monitoring of exemptions and tax holidays intensify.

The government’s challenge will be to strengthen compliance while providing sufficient support, including simplified processes and education, to ensure smaller businesses can transition without being overwhelmed.

Enforcement, however, is only one side of the coin. The NBFP emphasizes efficiency, formalization, and the use of digital systems to reduce discretionary enforcement while broadening the base.

The strategy is clear: compliance is easier when systems are predictable, and voluntary adherence is more achievable when taxpayers see that the process is fair, transparent, and linked to tangible public services.

Ultimately, Uganda’s FY 2026/27 revenue and fiscal plan is about more than numbers. It is a careful balancing act: linking economic growth to revenue mobilization, reducing reliance on debt, and formalizing the economy in line with the NBFP’s monetization agenda.

The Shs 40 trillion target is ambitious but underpinned by solid macroeconomic fundamentals, including robust GDP growth, low inflation, expanding industrialisation, and emerging oil sector revenue.

The real test will be execution. Done effectively, the strategy could deepen formal economic activity, increase public investment capacity, and create a more predictable environment for business and growth.

Done poorly, it risks overburdening smaller players and undermining the very expansion it seeks to monetize. For Uganda, this year’s fiscal and revenue plan is not just about collecting taxes, it is about translating ambition into sustainable economic transformation.

The writer is a Chartered Accountant and a Chartered Tax Advisor