Government considers new ways to fund budget following declining donor support

10 November 2024, 1:47 pm

By Ronald Ssemagonja

The Ministry of Finance, Planning and Economic Development has expressed concern over the growing decline in external financing for Uganda, warning that this could constrain the government’s ability to meet its expenditure requirements in a timely manner. The government made this statement during the presentation of the Budget Strategy for the Financial Year 2025/2026 in Kampala.

According to the Minister of State for Planning, Hon. Amos Lugoloobi, the decline in external financing is linked to the ongoing conflicts in Ukraine and Palestine, which have caused foreign funders to redirect their attention and resources from supporting developing countries like Uganda to financing those affected by the wars. “They are funding the wars in Ukraine, Israel, and Palestine. Their priorities have since shifted. Remember, as any country progresses beyond a middle-income level, it is seen as an adult capable of sustaining its own growth. Therefore, attention shifts away from such countries to the least developed ones, which still require concessional support. At this point, donor countries begin to believe that you can borrow commercially to finance your activities,” he said.

He also added, “We have been relying on external sources of financing for our budget for a long time, but these sources are dwindling. Now we must turn to innovative ways of financing the budget through domestic resources. One such measure is to leverage our available assets to issue long-term bonds, such as infrastructure bonds, where we can mobilise investment from private individuals and the diaspora to invest their resources.”

Mr Matia Kasaija, the Minister of Finance, Planning and Economic Development, stated that external financing has been on the decline, which necessitates strengthening the implementation of the domestic revenue mobilisation strategy. He explained that the government will finance the budget for the Financial Year 2025/2026 using both domestic and external resources. “We shall repurpose resources in the current budget and improve allocation efficiency, focusing on the prioritised sectors of the economy and the effective implementation of the domestic revenue mobilisation strategy, with a major focus on combating tax evasion and smuggling.”

According to the strategy, the government will operationalise new cities in the coming financial year. Cabinet and Parliament have approved the creation of 15 cities to be rolled out in phases. In FY 2020/2021, 10 cities were operationalised, including Soroti, Gulu, Lira, Arua, Hoima, Fort Portal, Mbarara, Masaka, Jinja, and Mbale. “I am honoured to announce that we have secured the resources to operationalise the remaining cities, effective 1st July 2025,” Kasaija said.