By Spy Uganda
The government has warned that disruptions in global export markets, escalating regional conflicts and worsening climate-related shocks pose significant risks to the implementation of its proposed Shs69.399 trillion national budget for the 2026/27 financial year.
The concerns are outlined in the National Budget Framework Paper (NBFP) for FY2026/27, which was tabled before Parliament on December 16, 2025 by the State Minister for Finance (General Duties), Mr Henry Musasizi, in line with the Public Finance Management Act (PFMA), 2015.
Under Section 9 of the PFMA, the NBFP sets out the government’s medium-term fiscal strategy, key macroeconomic assumptions, budget priorities and fiscal risks, and forms the basis for annual budget preparation and debt sustainability.
According to the framework, volatility in global trade remains a major threat to Uganda’s revenue mobilisation and foreign exchange inflows. Mr Musasizi noted that shifts in global trade patterns could reduce export earnings, thereby constraining foreign currency inflows critical to budget execution.
To mitigate this risk, government plans to prioritise export diversification, expand access to regional and continental markets, and improve the quality and quantity of export products in line with commitments under the African Continental Free Trade Area (AfCFTA) and the East African Community framework.
The warning comes despite recent improvements in export performance. Data from the Ministry of Finance’s Performance of the Economy Monthly Report for November 2025 shows that Uganda’s merchandise exports increased by 55.9 percent to $1.496 billion (about Shs5.4 trillion) in October 2025, up from $959.9 million (Shs3.47 trillion) in September.
However, the report cautions that exports remain heavily concentrated in gold and coffee, exposing the economy to external shocks and price volatility. Gold alone accounted for $964.6 million of export earnings in October 2025.
The NBFP also highlights instability in global financial markets as a growing fiscal risk, especially as Uganda continues to rely on external borrowing to finance infrastructure and development projects. Mr Musasizi warned that volatility in global financial conditions could distort borrowing costs and alter debt repayment obligations, potentially crowding out funding for priority sectors.
To cushion the economy, government says it will intensify domestic revenue mobilisation, fast-track innovative financing mechanisms, and reduce reliance on costly external borrowing.
These risks are compounded by Uganda’s rising public debt stock, which stood at Shs119.4 trillion as of September 2025, according to Ministry of Finance data. Debt servicing continues to consume a growing share of domestic revenues, further limiting fiscal space.
The framework also identifies regional insecurity, particularly in neighbouring countries, as a fiscal risk due to its potential to disrupt trade routes and trigger refugee inflows. Uganda hosts one of the largest refugee populations in Africa, with refugee-related spending increasingly placing pressure on social services and public finances.
Domestically, climate change is flagged as a critical threat to economic performance, particularly agriculture, which employs more than 70 percent of Ugandans and contributes about 24 percent of gross domestic product (GDP). Erratic rainfall, prolonged droughts and floods continue to undermine agricultural productivity and damage infrastructure.
To address these challenges, government has committed to strengthening climate adaptation policies and scaling up access to climate finance, including green bonds and debt-for-nature swaps, in line with the National Climate Change Act, 2021 and the Paris Agreement.
Despite the risks, government remains optimistic about the medium-term outlook. The NBFP aligns the FY2026/27 budget with Vision 2040 and the Fourth National Development Plan (NDP IV), which aims to transform Uganda into a middle-income economy through industrialisation and commercialisation.
The framework projects economic growth of up to 10.4 percent by the end of FY2026/27, partly driven by the anticipated start of oil production. Government estimates that the economy could expand from the current GDP of about $60 billion to $500 billion by 2040 under its Tenfold Growth Strategy.
Priority investments will focus on security, transport infrastructure, electricity, irrigation, education, health, water, industrial parks, domestic revenue mobilisation, regional integration, environmental protection, disaster management and anti-corruption efforts.
Implementation will be anchored on four strategic growth drivers: agro-industrialisation, tourism development, mineral-based industrialisation including oil and gas, and science, technology and innovation.
Mr Musasizi described the NBFP as a key anchor for Uganda’s economic transformation, saying it lays the foundation for higher household incomes, job creation and full monetisation of the economy.
However, analysts caution that achieving these ambitions will depend on effective management of fiscal risks, improved project execution and stronger efficiency across public institutions amid a challenging global environment.
