BOOK REVIEW -- THE LEXUS &THE OLIVE TREE VS CHIP WAR

I recently read ChipWar by Chris Miller — a riveting account of how the semiconductor became the world’s most important technology and, by extension, the nerve centre of 21st-century geopolitics. As I turned the pages, I couldn’t help but contrast its thesis with that of Thomas Friedman’s The Lexus and the Olive Tree that I read about two decades ago.

Reading the two side by side, one gets a sense of how the world has changed — and hasn’t. Friedman was writing at a time when the buzzword was “globalisation,” and there was a kind of religious conviction that the market, the internet, and capital flows would knit the world into a single prosperous village. That vision now feels quaint, almost naïve. Miller’s narrative, meanwhile, is one of choke points, technological bottlenecks, and the fragility of interdependence.

The two are particularly interesting in understanding the happenings in the Middle East, I think.

Friedman’s “Lexus”, which name I recently learnt was an abbreviation for “luxury export to the US”,  was the symbol of progress: high-tech, efficient, and global. His “Olive Tree” was the reminder that identity, culture, and history still matter — and often collide with the Lexus in unpredictable ways. In Gaza, in southern Lebanon, in the Red Sea, we are witnessing just such a clash. The global supply chain hums along, until it hits a blockade — metaphorical or literal — thrown up by actors who feel excluded or endangered by the global system.

Friedman’s hope was that the gravitational pull of the global economy would discipline states and societies into predictable behaviour. You don’t throw rocks at the Lexus showroom if you’ve got one parked in your garage. But as the current crisis shows, not everyone got the Lexus, and the Olive Tree has deep roots. In fact, the more globalised the world has become, the more some have doubled down on identity, resistance, and sovereignty.

Where Friedman saw a flattening world, Chris Miller sees a world stratified by silicon — specifically, the chip. Chip War

argues that semiconductors are not just components of technology but weapons of statecraft, economic leverage, and military dominance. The entire global system runs on chips — from AI and cloud computing to missile guidance and cyber surveillance. And crucially,

no one country controls the whole supply chain.

The Middle East, too, is entangled in this chip narrative. Iran has been desperate to circumvent sanctions by building its own tech capacity. Israel’s dominance in drone technology, cyber tools, and precision warfare depends on cutting-edge chips. The Gulf states, meanwhile, are investing in AI and digital infrastructure as part of their post-oil futures. And yet, almost none of them can produce the chips they need. They are at the mercy of a fragile, globally dispersed supply chain — one increasingly weaponised by the likes of Washington and Beijing.

The chip is the new oil — but it’s even more volatile.

Take the Houthis in Yemen. A militia with rudimentary drones has managed to disrupt global shipping in the Red Sea, sending freight costs soaring and rerouting traffic around Africa. It’s a vivid example of what Miller and Friedman both recognised in different ways: globalisation has empowered non-state actors in unprecedented ways. The Houthis don’t need to hold a capital city to project power; they just need a drone, a grievance, and a global market to disrupt.

And the consequences aren’t confined to the region. A spike in insurance premiums in the Suez Canal or a supply delay for Taiwanese chips affects the global economy. The butterfly effect of a regional flare-up now has boardroom and battlefield consequences from Frankfurt to Free Town.

This fragility — what Miller calls “the bottleneck economy” is the reality we now inhabit. Whether it’s ASML’s lithography machines in the Netherlands, or Taiwan’s TSMC factories, or Israel’s tech corridors, the supply chain that undergirds the global economy is a high-wire act. And when tensions rise in the Middle East, the whole system wobbles.

What both The Lexus and the Olive Tree and Chip War remind us is that power is no longer just about tanks and territory. It’s about networks, chips, and narrative. And the Middle East, long seen through the prism of oil and ideology, is now a front in the battle for technological and supply chain supremacy.

But to me, perhaps the deepest insight comes from the contrast between the two books. Friedman saw a world where prosperity would temper politics. Miller shows us a world where technology is politics. And in the Middle East today, the Olive Tree hasn’t been uprooted — it has simply grown into the data centres, missile batteries, and AI command rooms of the region’s new power players.

The old conflict over identity, territory, and belief now plays out with silicon and software layered on top.

In the end, the question is not whether the Lexus can outrun the Olive Tree, or whether chips will replace bullets. It is whether we are ready to govern a world where both coexist in a deeply unstable equilibrium. A world where prosperity and progress are still possible — but only if we understand the new rules of power.

And those rules are being written — in code, in silicon, and increasingly, in the sands of the Middle East.

For a small, pre-industrial country like Uganda, the lessons from Chip War and The Lexus and the Olive Tree

are both sobering and instructive. In a world where technological supremacy defines geopolitical clout and where global supply chains are both opportunity and threat, Uganda must recognise that digital sovereignty and data infrastructure are the new frontiers of development and security. While we may not build chips, we must invest in local talent, protect digital infrastructure, and strategically align with global tech blocs.

In a world ruled by chips and chokepoints, staying non-aligned is not a strategy. It’s a vulnerability. Uganda must leapfrog wisely—choosing the right alliances, building digital capacity, and anchoring the Olive Tree in the soil of a fast-changing global order.

 

THE UGANDA BUDGET: CLOSING OLD GAPS, OPENING NEW OPPORTUNITIES

Uganda’s 2025/26 budget, clocking in at sh72 trillion—approximately $19 billion, or nearly five times the size of the country’s $4 billion economy in 1986 is a striking symbol of how far the country has come. It reflects three and a half decades of relative macroeconomic stability, revenue growth, and ambition to deliver public goods and spur transformation.

The budget’s scale is a response to both promise and pressure. It seeks to expand infrastructure, finance social programmes, repay debt, and support livelihoods. It also continues a long-term strategy to bridge historical gaps—especially in public infrastructure, created by decades of neglect during the 1970s and 1980s. Those years of political instability and economic decline left Uganda with little to show by way of roads, power plants, or functioning institutions, even as the population doubled.

Successive budgets in the 2000s and 2010s have attempted to address this backlog, and the 2025/26 budget is no exception. With sh4.5 trillion allocated to roads and sh2.3 trillion to energy, the investment continues—reflecting an understanding that without strong infrastructure, the goals of industrialisation and regional trade competitiveness will remain elusive.

The commitment to infrastructure is not new.

In 2011/12, infrastructure spending was just under sh3 trillion. A decade later, in 2021/22, it had more than doubled. In contrast, allocations to education and health— sh4.2 trillion and sh 2.8 trillion respectively in this year’s budget—have grown more slowly, often falling behind both inflation and population growth.

Infrastructure’s share of the development budget has consistently outpaced social sectors, underscoring government belief in its catalytic role. But the imbalance raises a fundamental question: are we building structures faster than we’re building the people to run and benefit from them?

Even so, legacy gaps cannot be solved with money alone.

Uganda’s Achilles’ heel has been the long and inefficient project execution cycle. Major projects such as Karuma Dam have taken far too long to complete, delaying their contribution to growth. If project timelines were shortened and efficiency improved, the country could begin to realise returns on investment faster.

At over sh96 trillion—roughly 52 percent of GDP—public debt is still within sustainable bounds by international standards. Yet the trend is worrying, particularly because of the increasing share of commercial and non-concessional loans. This year, sh19.8 trillion, or 28 percent of the national budget, will go to debt servicing alone—resources that might otherwise have gone into education, health, or job creation.

Even more pressing is the growing mountain of domestic arrears, now estimated at sh14 trillion. That figure has more than tripled since before the COVID-19 pandemic and represents unpaid obligations to suppliers, service providers, and contractors. These arrears starve the private sector of liquidity, especially small and medium enterprises that are often ill-equipped to wait months—or years for payment. Tackling this backlog must be a priority if government spending is to translate into economic activity.

On the social front, the government is pushing ahead with the Parish Development Model (PDM) and Emyooga programmes as vehicles for inclusive growth. While the national impact of these initiatives has so far been limited and uneven, green shoots are beginning to emerge.

In some districts, SACCOs have started to disburse funds effectively, with early signs of increased incomes and improved household resilience. The challenge now is to consolidate these gains and scale best practices across the country, ensuring that these programmes are not just disbursement vehicles but agents of lasting transformation.

Education and health continue to be under strain. Despite gradual budget increases—sh4.2 trillion and sh2.8 trillion respectively in this cycle, these sectors face growing burdens from a rising population, ageing infrastructure, and underpaid personnel. While the numbers suggest progress, the systems themselves remain overstretched.

On the revenue side, URA’s digitalisation and enforcement drives are projected to bring in sh32 trillion in domestic revenue. That’s a significant step up from previous years. Yet the challenge persists: the tax base remains narrow. Much of the informal economy still lies beyond the tax net, meaning the burden continues to fall disproportionately on the formal sector—already under pressure from high compliance costs and limited access to affordable credit.

Importantly, the budget allocates sh7.1 trillion to defence and security—more than the combined allocation to health and agriculture. At first glance, this might seem misaligned with social and economic priorities. But Uganda’s history offers context: without stability, development is impossible. The investment in security has underpinned the growth we see today. It has enabled long-term planning, encouraged investment, and facilitated regional trade. In a volatile neighbourhood, Uganda’s relative calm is a competitive advantage—and one that must be maintained.

That said, the balance of spending still invites scrutiny. Agriculture—the backbone of the economy and the largest employer receives just sh1.8 trillion. Tourism, a top forex earner, gets sh220 billion. Government has argued in the past that all the allocations in security, infrastructure and social services aid agriculture, but it is also true we need to ramp up investment in extension services, water for production and access to quality inputs.

The allocation to science, innovation, and digital transformation remains small relative to their potential impact. If Uganda is to harness the productivity of its youth bulge, more deliberate investment in high-growth sectors will be needed.

The 2025/26 budget reflects a country still in the thick of transition. It attempts to correct for the past, meet the demands of the present, and chart a path toward the future. The ambition is evident. The implementation, however, must improve. Without faster project execution, stronger accountability, and a more productive use of borrowed funds, the gains of today may not be enough to sustain the Uganda of tomorrow.

BANKS ARE QUIETLY WINNING — BUT FOR HOW LONG?

Uganda’s banking sector doesn’t scream success. It doesn’t thump its chest or light up headlines. But make no mistake: it is quietly, efficiently, and methodically winning.

The numbers from the Uganda Bankers Association’s 2024 report are hard to ignore. Total assets for the sector reached sh48.2trillion, up nine percent from sh44.3trillion in 2023. Net profits after tax came in at sh1.58trillion—the highest in the sector’s history—rising from sh1.45trillion a year earlier.

At first glance, this looks like a continuation of the same old story: steady growth, strong balance sheets, healthy profits. But dig a little deeper, and you’ll see a sector entering a new phase. One where scale isn’t enough. Where efficiency, caution, and digital fluency are now the currency of banking success.

Start with the deposits. Total customer deposits grew to sh39.8 trillion

, a shade over eight percent from 2023’s sh36.8 trillion. The local currency still dominates, accounting for 69.8 percent of all deposits, but that’s down from 72.4 percent the previous year. It’s a gentle signal—nothing alarming yet—that confidence in the shilling is softening at the margins. With government borrowing still crowding out the private sector and the exchange rate under pressure, depositors seem to be hedging their bets.

Then there’s the loan book. Loans and advances to customers ticked up to sh22.3trillion, up from sh20.7trillion in 2023. A respectable 7.7 percent increase. But it’s where the money is going that matters. Trade continues to eat the lion’s share at 20.9 percent, followed by personal loans, building and construction, and manufacturing. Agriculture, despite being the lifeblood of the economy, still only claims 8.3 percent of the loan pie. That’s a structural failure, not just a commercial decision.

Meanwhile, the cracks are starting to show. The Non-Performing Loan (NPL) ratio nudged upwards to 5.3 percent, from 4.9 percent last year. In absolute terms, NPLs now stand at sh1.18 trillion

, up from sh1.01 trillion. And while banks are beefing up their provisioning—sh515.2 billion set aside for bad debts, up 14.5 percent the deterioration in asset quality is a clear warning. This isn’t a crisis. But it is a reminder: growth without rigour is just a risk postponed.

And yet, despite it all, banks are thriving. Their capital base grew by 12.6 percent—from sh6.12 trillion to sh6.89 trillion—bolstered by profits and, in some cases, fresh capital injections. That’s not just a regulatory requirement. It’s a strategic decision. With the government scaling back its borrowing appetite and returns on treasury paper likely to flatten, banks are turning back to their core business: financial intermediation.

But here’s the catch.

The industry is still highly concentrated. The top five banks—Stanbic, Centenary, ABSA, Standard Chartered, and Equity—hold over half the assets and profits. The rest of the sector is jostling for relevance. And while smaller banks are growing quickly, they’re still playing catch-up. The market remains skewed, with smaller players struggling to break out of their niche comfort zones.

Digitisation, meanwhile, has gone from buzzword to baseline. Mobile and internet channels now dominate transaction volumes. The branches haven’t disappeared—but they’ve changed. They’re leaner, meaner, and no longer the centre of the banking universe. The upside? Lower costs, faster service, broader reach. The downside? Digital fraud, customer alienation, and growing concerns about transaction fees—especially for low-income users who don’t understand the fine print until it’s too late.

Still, the shift is irreversible. And the banks that have invested early in systems, security, and customer education are now reaping the benefits. They’re not just pushing apps—they’re building ecosystems. From payments and savings to insurance and microloans, the smartphone is fast becoming Uganda’s de facto bank branch.

And yet, the elephant in the room refuses to budge: cost-to-income ratios. Despite all the innovation, the sector’s average sits stubbornly above 50 percent. That’s high by regional standards and leaves little room for error if interest margins tighten. It also means banks will continue to pass costs onto customers—whether through fees, spreads, or service limitations.

So what does all this mean?

It means Uganda’s banking industry is in transition. From analogue to digital. From scale to efficiency. From top-line growth to bottom-line discipline. The profitability is real, but so is the fragility. The sector is walking a tightrope—between opportunity and exposure, between transformation and turbulence.

The Bank of Uganda has done a solid job of macroprudential supervision. Liquidity levels are healthy. Capital adequacy ratios are being met. And there’s no sign of systemic stress. But if the regulator wants to future-proof the industry, it will need to think beyond compliance. How can capital be channelled into productive sectors? How can banks be nudged to lend more to agriculture, to green energy, to local manufacturing? And how do we ensure that banking becomes a tool for transformation, not just transaction?

Because here’s the uncomfortable truth: for all their profits, banks are still not lending enough to the sectors that matter most.

And that’s not just a policy challenge. It’s a commercial opportunity.

There is money to be made in lending to agro-processing, to SMEs, to women-led enterprises. But it requires different tools, different risk models, different appetites. It requires banks to reimagine what it means to serve—not just the salaried, but the self-employed. Not just the formal, but the informal. Not just the central, but the peripheral.

Uganda’s banks, in 2024, are more profitable than ever. More digital than ever. More capitalised than ever.

But are they more inclusive? More developmental? More catalytic?

That’s the next frontier.

QUARTZ, CODE AND COFFEE: UGANDA’S TECHNOLOGICAL AWAKENING

For decades, Uganda has stood at the edge of the technological revolution—watching, importing, consuming. We bought the computers, laid the fibre, issued grand development statements—and yet, we remained a nation defined more by what we lacked than what we made.

But as the National Science Week, which opened yesterday at the Kololo Independence grounds shows, a quiet but profound shift is taking place. This time, it’s not just another government initiative. It’s a declaration: Uganda intends to become a builder.

Think about quartz, the high-grade silica sand scattered across Uganda’s valleys. For years, it sat there—unappreciated, unexploited. But a small team of Ugandan technologists and scientists has been quietly testing its potential, running pre-feasibility studies, and exploring how to refine it into metallurgical-grade silicon—the base ingredient for semiconductors, solar panels, and a host of high-tech applications.

The science is tough. Silicon is extracted by stripping oxygen from silicon dioxide—an energy-intensive process usually done using carbon sources like coal. And Uganda, as it turns out, has that too. Down south, coal deposits and biomass reserves could power a local silicon industry. It's still early, but the feasibility studies are promising. First, metallurgical-grade silicon. Then silicon wafers. Eventually, chips. That’s the roadmap.

This is not fantasy. It’s part of a broader, methodical movement gaining steam under the Science, Technology and Innovation (STI) Secretariat. These aren't vanity projects. They’re deliberate steps to rewire Uganda’s economy around innovation, value addition, and ecosystem thinking.

The emerging vision is simple but bold: move from resource extraction to resource transformation. From raw quartz to silicon. From unprocessed coffee to premium-branded exports. From importing sensors with a 70 percent defect rate to building locally with near-zero failure.

And it’s already happening.

Last week I visited the Deep Tech Center of Excellence in Namanve where engineers are prototyping, fabricating, and testing devices right here in Uganda. Local firm Innovex is building world-class sensors that meet international standards. Meanwhile, the Roke Cloud initiative is laying the groundwork for Uganda’s own cloud computing infrastructure—so our data doesn’t have to fly halfway around the world and back. These projects aren’t mere technical experiments—they are strategic acts of sovereignty.

Even artificial intelligence isn’t being left to Silicon Valley. An AI Studio is up and running, not as a government department, but as a self-organising ecosystem of volunteers, entrepreneurs, and researchers. In a country where policy has often strangled innovation, this decentralized approach is refreshing—and radical.

David Gonahasa, Team leader Industry 4.0+ at STI enthusiasm for what is happening, may make believers out of skeptics, like me, to whom all this seems too incremental. Too fragile.

That’s how real innovation begins—not with big bangs, but with proof of concept, he tells me. Like the Kampala Motor Corporation, whose buses are rolling proof that local manufacturing isn’t a pipe dream. Or the early experiments in silicon processing, showing that what we have—quartz, energy, and coal—can be more than geological trivia. They are the raw materials of a digital future.

Of course, none of this will work without a change in mindset. For years, Uganda has suffered from what you might call a “consumption complex.” We trusted foreign goods, foreign ideas, foreign experts. Our local equivalents were seen as second-best—or worse, as charity cases. But the STI approach is forcing a rethinking. Now, the focus is on outputs, not inputs. Capabilities, not checklists.

This isn’t just economic policy—it’s cultural reform.

That’s why Science Week matters. It’s not just a conference or an exhibition. It’s a mirror and a megaphone. It shows us what’s possible, and it announces to the world that Uganda is no longer content to sit on the sidelines of global innovation.

It’s also about visibility. Seventy international venture capitalists have been invited to see for themselves what Uganda has to offer. Not just pitches, but products. Not just decks, but factories. These investors aren’t being courted for handouts, but for partnership—and perhaps even a bit of surprise. Because Uganda is doing something unusual: building patiently, locally, and with intent.

To be sure, challenges remain. For instance extracting silicon at scale is still expensive. Energy-intensive processes require environmental foresight. The legal frameworks for high-tech industries are still catching up. And Uganda’s venture ecosystem is in its infancy.

But consider where we’re coming from. From a country whose economic narrative has been dominated by agriculture and infrastructure, we’re pivoting to one where microchips, sensors, cloud infrastructure, and AI studios are part of the national conversation. That’s not just development—it’s transformation.

In a sense, Uganda’s science revolution is an echo of its coffee renaissance. Once exporters of raw beans, local entrepreneurs are now roasting, branding, and selling to premium markets. The logic is the same: add value at home, keep the margins, build capability.

If we can do it with coffee, why not with quartz?

The future is being written now—by scientists, by entrepreneurs, by policy shapers who understand that real development isn’t about donor metrics or ribbon-cutting ceremonies. It’s about building capacity and retaining value.

Uganda doesn’t lack resources. We’ve always had them. What we lacked was the will to turn those resources into a foundation for innovation. That may finally be changing.

And if it does, we won’t just be another developing country tinkering at the edges of someone else’s technology. We’ll be creators in our own right—transforming quartz into code, and ambition into industry.

So join me this week at the Science Week to see what our government and more importantly our young people and scientists are up to.

 

A BITTER FAREWELL -- WHAT UMEME EXIT SAYS ABOUT UGANDA'S INVESTMENT CLIMATE

When Uganda signed over its power distribution network to Umeme in 2005, it marked one of the country’s most ambitious public-private partnerships. 

The goal? To bring efficiency, capital, and expertise into a sector long plagued by losses, unreliable service, and chronic underinvestment. 

Two decades later, Umeme exits the stage—mission largely accomplished on the technical front, but mired in a bruising legal battle that threatens to stain the legacy of the entire arrangement.

The company’s 2024 audited results read more like a legal case file than a financial report. A Ushs 511 billion loss. A balance sheet cratered by revaluation and provisioning. A contentious Buyout Amount of US$292 million (Ush1.05 trillion) left unpaid by government and now headed for international arbitration. And in the background, a government seemingly reluctant to make good on what Umeme claims are ironclad contractual obligations.

Make no mistake: Umeme’s operational track record is strong. Energy losses cut from 38 percent to 16 percent. Over $860 million invested in the grid. Two million-plus customers connected. In 2024 alone, electricity demand rose by 10.8 percent, driven by reliability improvements and an aggressive connection rollout. Umeme may not have been perfect—tariff issues and customer perception always lingered—but it largely delivered on its mandate.

But now, with the concession expired in March  and assets retransferred to Uganda Electricity Distribution Company Limited (UEDCL), the focus has shifted to a high-stakes legal showdown. Umeme claims it is owed the Buyout Amount in full, plus interest. The government disputes the calculation. With both parties dug in, arbitration proceedings have been triggered in London, as per the Concession Agreement.

This is where things get messy—and expensive.

International arbitration is no quick fix. Even in straightforward commercial disputes, timelines can stretch from 18 months to 3 years, depending on complexity, evidence gathering, and availability of tribunal members. For Uganda, this means the cloud of the Umeme dispute could hang over its investment narrative for the better part of the current political term. Worse, if the arbitrators side with Umeme, government may find itself on the hook for not just the US$292 million principal, but contractual interest which, if compounded, could push the liability well north of US$350 million.

To put that in context, that’s more than the annual budget for Uganda’s Ministry of Energy. And unlike domestic obligations, arbitration awards carry international enforceability—meaning non-payment risks asset seizures abroad, credit downgrades, and frozen investor appetite.

And here's the real danger: regardless of outcome, the very existence of this dispute is already damaging.

It paints a picture of Uganda as a country where concessions end not with handshakes but with spreadsheets, summons, and public notices. For foreign investors looking at Uganda’s infrastructure, oil and gas, or manufacturing sectors, the message is sobering. “What happens when my project ends?” “Will I get what I’m owed?” “Will the rules suddenly change?” These are the kinds of questions now echoing in boardrooms and investment committees across the region.

Uganda has worked hard over the last two decades to market itself as a reliable investment destination. Liberalised capital markets. A central bank that largely minds its business. Predictable tax and trade regimes. But as any investor will tell you, the real test of a market isn’t when you enter—it’s how you're treated when you exit.

The Umeme case now sits at that crossroads.

The government still has room to salvage the narrative. It could settle before arbitration heats up, agreeing on an audited figure and payment schedule that reflects the country's fiscal realities. It could signal willingness to uphold contractual terms—even amid disagreement. Or, it could double down and risk a binding award that could send shockwaves through its entire PPP strategy.

Because here’s the thing: Umeme is not an isolated case. Uganda has ambitions to build roads under PPPs, develop power dams, oil pipelines, and even airport infrastructure. All these projects will require long-term capital. And long-term capital, by its very nature, hates uncertainty at the end of a project. What investor wants to spend 20 years building an asset only to be told at the end, “let’s talk again in court”?

None of this is to absolve Umeme of scrutiny. Its 2024 report shows rising operating costs (up 31 percent) and a dip in operating cashflows. But these are transitional pains, not breaches of mandate. What matters now is not just who wins in London—it’s how Uganda is seen handling a major concession exit under the microscope.

Uganda’s power sector owes much of its turnaround to the structure and discipline imposed by the Umeme concession. But if that same sector becomes the graveyard for investor trust, the long-term cost could dwarf any unpaid Buyout Amount.

Trust is what built the grid. It must also power the next phase of Uganda’s growth. Arbitration may resolve the numbers. But the reputational damage will need something deeper—political maturity, legal clarity, and the humility to honour the deals we sign.

UGANDA BUDGET BETS ON BRAINS OVER BRUTE FORCE

In a world where the taxman is never far behind and the budget speech is often a catalogue of fresh levies, new charges, and revised rates, Finance Minister Matia Kasaija’s decision to announce no new taxes in the Sh72.1 trillion budget for FY2025/26 was—dare I say it—a minor fiscal miracle.

Now, let’s not kid ourselves. The government still needs money. The deficit is a chunky 7.6 percent of GDP. The debt clock keeps ticking. But this year, instead of reaching deeper into the same old pockets, Treasury took a more strategic route—don’t tax more, tax better.

It’s a position as rare as it is refreshing. And in this economic moment, it’s also very, very wise.

After all, Uganda is still nursing its wounds. COVID-19 may be a distant memory, but its economic scars aren’t. Businesses—especially the small and informal—are still playing catch-up. Add to that a volatile global economy, rising debt servicing costs, and soft consumer demand, and it becomes clear: this is not the time for new tax burdens.

Instead, the government wants to fix the system. URA is doubling down on digital tools—EFRIS, DTS, automated audits, the whole alphabet soup—to bring more efficiency into tax collection. Compliance gaps in rental income, digital commerce, and high-net-worth individuals are in the crosshairs. The informal sector, long treated like a rounding error, is finally getting structured attention.

It’s the right call. Not just because it spares the taxpayer some pain, but because it signals a subtle shift in philosophy: that revenue is a function of trust and efficiency, not just compulsion.

All this is happening against a relatively sunny economic backdrop. Growth this year is clocking in at 6.3 percent, inflation has eased to 3.4 percent, and the Ugandan shilling has defied the odds to become the most stable currency in Africa, at least according to the IMF’s International Financial Statistics. GDP now stands at Sh226.3 trillion—up from Sh203.7 trillion last year—and is expected to touch Sh254.2 trillion next financial year.

There’s a new swagger in our export numbers too. Coffee earnings doubled to $1.83 billion. Industrial exports are taking up more space in the basket. And the country is finally getting serious about monetising what it grows. In the Harvard Economic Complexity Index, Uganda is becoming more sophisticated, more “complex,” punching above its income level. For once, the story of economic transformation is more than just speechwriter flair.

But scratch the surface, and a few uncomfortable truths peek through.

"Domestic arrears, remain a festering sore. By conservative estimates, government owes its suppliers north of Sh14 trillion—money that many SMEs will never see in full or on time. The budget speech mentioned them, sure, but not in the tone of urgency the crisis demands. You can’t talk up private sector-led growth while stiffing the very businesses you contract. It’s like pushing someone off a cliff and then offering them climbing gear.

These arrears distort more than just balance sheets. They ruin creditworthiness, lead to layoffs, and undermine tax compliance. Worse, they fuel a quiet despair among entrepreneurs who once believed doing business with government was a ticket to growth.

And then there’s the not-so-quiet elephant in the room: corruption.

The budget offers the usual playbook—digitise procurement, automate tax systems, roll out e-whatever. That’s all good. But what’s missing is the political spine to back it all up. What good is an electronic audit trail if the audit ends in a dusty drawer? If prosecution is selective? If impunity is routine?

We’ve seen too many grand digital tools defeated by small brown envelopes.

Even more concerning is the rise of off-budget mechanisms—special funds, trusts, "strategic investments"—that increasingly escape the traditional accountability radar. If the public purse is leaking through side doors, it won’t matter how tightly you lock the front gate.

And yet, there is some hope.

The budget’s Shs2.43 trillion investment in wealth creation—through PDM, UDB, Emyooga, and others—is a continuation of the government’s bet on grassroots economic transformation. It’s an effort to turn more Ugandans into producers, not just consumers of the economy. The Sh1.86 trillion earmarked for agro-industrialisation, the big push in infrastructure (Sh6.92T) continues, and the funding for science and technology (Sh835B) all point to a state that wants to do more than just spend—it wants to build.

But none of it will work unless the state starts paying what it owes, curbing what it leaks, and collecting what it’s supposed to—fairly, consistently, and transparently.

So yes, let’s cheer the absence of new taxes. It’s a bold political decision and a clever economic one. But let's also not forget: doing nothing is not the same as doing enough. Tax reform without public sector reform is just clever accounting. A bigger budget won’t mean better lives unless the money reaches the intended beneficiaries.

The best part of this budget may be what was left unsaid: no new taxes. Now let’s hope it’s followed by no more arrears, no more excuses, and maybe—just maybe—no more corruption.

 

UGANDA'S BUDGET PLAN FACES HARD TRUTHS

Today, June 12th, 2025, Finance Minister Matia Kasaija will rise before Parliament to read Uganda’s national budget, weighing in at a hefty sh72 trillion. 

That number alone is staggering. Two decades ago, Uganda’s national budget stood at just over sh4 trillion. This represents a compounded annualised growth of about 15 percent  or more than twice the average annual growth of the economy duing the same period. 

In 2005, the government operated with a modest financial envelope largely dependent on donor aid and constrained by a narrow tax base. Fast forward twenty years, and the budget has grown more than seventeen-fold—an extraordinary leap that reflects both inflation and a genuine broadening of the economy.

This growth tells a story. Some of it is positive: domestic revenue collection has improved, the private sector has deepened, and public infrastructure has expanded. But it also tells of our growing appetite for debt, recurrent expenditure, and a state machinery that has ballooned over time—sometimes without matching output.

The National Budget Framework Paper (NBFP) that underpins this year’s budget is heavy on aspiration. Its theme—“Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding and Broadening Social Services, Digital Transformation and Market Access”—ticks all the right boxes. It is a bold vision of structural transformation, if ever there was one. The question is: do the numbers, and more importantly the execution, match the rhetoric?

On paper, government aims to propel the economy past  growth next year, en route to double-digit expansion once commercial oil production comes onstream. The economy is projected to hit sh250 trillion by 2025/26, with per capita income rising to $1,339. The macro outlook is buoyant, inflation is below three percent, and exports are rebounding. But if Uganda has learned anything over the past two decades, it's that development does not reside in GDP forecasts. It lies in tarred roads that go somewhere, school roofs that don’t leak, and health centres that have medicine and staff. That’s where the real audit begins.

The NBFP places infrastructure front and centre, as it always does. Roads, electricity transmission, the Standard Gauge Railway, and the near-complete Kabalega Airport all receive top billing. These are necessary investments, no doubt. But Uganda has a troubling history of building things that don’t work—or that work only after years of delays. The Karuma Dam still haunts our planning psyche, completed on paper yet underutilised . Projects are announced, budgeted, and even launched, but coordination and oversight remain our Achilles’ heel. The issue is not money. It is follow-through.

Meanwhile, agriculture—the lifeline of the majority of Ugandans—remains scandalously underfunded. Just 2.5 percent of the budget is earmarked for a sector that employs over 70 percent of the population and contributes 24 percent to GDP. The NBFP speaks earnestly about agro-industrialisation, value addition, irrigation, and warehouse receipt systems. 

But the numbers don’t back the talk. 

Farmers still lack extension services, affordable credit, and basic infrastructure. If we are serious about lifting people out of poverty, especially in rural areas, this imbalance must be corrected. You don’t monetize an economy by starving its core.

Then there’s the issue that quietly cripples every budget cycle—youth unemployment. Uganda is the second-youngest country in the world. Every year, over half a million youths enter the job market, and most find no foothold. The NBFP gestures at solutions—the Parish Development Model, Emyooga, UDB credit—but these are fragmented interventions. What’s missing is a national employment strategy that connects education to opportunity, apprenticeships to actual jobs, and the informal sector to scalable enterprises. We keep trying to solve a structural problem with project-level fixes. It hasn’t worked before, and it won’t now.

But no problem is more corrosive to our fiscal credibility than the domestic arrears overhang. 

As the Finance Minister delivers his sh72trillion speech, it’s worth remembering that over sh13.8 trillion in unpaid government bills lurk in the shadows. This includes overdue payments to contractors, suppliers, pensioners, and court awardees. The NBFP proposes to clear sh1.4 trillion this financial year—an improvement from the laughable sh200 billion previously allocated. But even at that rate, it would take a decade to clear the current stock, assuming not a single new shilling is added to the arrears pile—which, of course, is fantasy.

This isn't just a bookkeeping issue. Domestic arrears are strangling the private sector. Businesses that trusted government contracts are folding. Banks are tightening lending. Job creation is stalling. It’s a silent crisis—one that the government has so far been unwilling to confront head-on. The fact that we continue to accrue arrears even as we trumpet revenue growth speaks to deeper issues of fiscal discipline and accountability. If Uganda were a company, it would be on the verge of default.

And yet we lose just as much—if not more—to corruption. According to estimates, Uganda bleeds over sh2 trillion annually through procurement fraud, ghost payments, and tax evasion. That’s nearly equivalent to what we spend on the roads budget. Every year, the Auditor General uncovers the same rot. Every year, we shrug. Until we make examples of the corrupt—not through commissions of inquiry, but through convictions and asset recovery—our budgetary ambitions will remain castles built on sand.

There are bright spots. The government’s push for digital transformation is timely and potentially transformative. Fintech and mobile money are already revolutionising access to financial services. If supported by smart regulation, public investment in digital infrastructure, and robust consumer protections, Uganda could leapfrog decades of development barriers. But again, the follow-through must be real. It’s not enough to build an app or lay fibre optic cable. We need to ensure that farmers, traders, students, and health workers can actually use these tools to improve their livelihoods.

And then, of course, there’s oil. With Tilenga and Kingfisher past the halfway mark and the EACOP progressing, first oil is a real prospect in the coming financial year. But this is a double-edged sword. Oil can lift us, or it can wreck us. If we allow oil revenues to feed bloated bureaucracies and politically driven consumption, we will have wasted the opportunity of a generation. If, on the other hand, we invest in human capital, infrastructure, and industrial transformation, we might yet chart a different course. It’s a choice—not an inevitability.

So as the Finance Minister delivers the sh72 trillion budget this afternoon, we would do well to listen not just to what is said, but to what is not. We should scrutinise not only the allocations, but the arrears. Not only the promises, but the history. Because ultimately, budgets are not about figures. They are about faith. Faith that when government says it will build a road, the road will be built. That when a contractor finishes a job, he will be paid. That when money is allocated to a school, children will learn.

Until we restore that faith, even sh72 trillion won’t be enough.