Kampala: Uganda has announced that it will cut foreign budget support by more than 80 percent in the next financial year starting in July. The decision marks a major shift in how the government plans to fund its national budget.
According to the finance ministry, external budget support will fall to about 331 billion Ugandan shillings, down from about 2.1 trillion shillings in the current financial year. This support mainly comes from foreign loans and grants provided directly to help fund government spending.
Officials said the government is focusing more on raising money at home instead of depending on foreign partners. Domestic revenue is expected to grow by about nine percent to 40.1 trillion shillings in the next financial year. The government plans to achieve this through better tax collection and wider economic activity.
At the same time, Uganda plans to reduce the amount of money it borrows from local markets. Domestic debt issuance is expected to fall by about 21 percent as part of efforts to control public debt and reduce interest costs.
Although the finance ministry did not give a specific reason for the sharp cut in foreign support, analysts say the move reflects pressure to manage rising debt and prepare for future income from oil production. Uganda expects to begin commercial oil production later this year, which could bring in new revenue if projects stay on track.
The decision comes at a time when many countries in Africa are facing lower foreign aid and tighter global financial conditions. Uganda also hosts a large refugee population and has depended on international partners for years to support its budget and humanitarian programmes.
Economists say the new policy could strengthen Uganda’s financial independence in the long term if domestic revenues increase as planned. However, they warn that a sudden drop in foreign support could affect public services and development projects if local revenue growth is slower than expected.
The government says it remains committed to funding key sectors such as health, education and infrastructure while moving toward a more self funded budget system.