THE UGANDA BUDGET'S LOUDEST SILENCE

The headline numbers in Uganda's 2026/27 budget are impressive.

The economy is projected to grow by 10.2 percent as oil production comes on stream. Domestic revenues are expected to rise by 28 percent from Shs35.7 trillion to Shs45.6 trillion, lifting the tax-to-GDP ratio to 15.9 percent. Exports continue to grow, inflation remains under control and government is talking confidently about accelerating the journey towards a $500 billion economy.

On the surface, there is much to celebrate.

Yet buried deep in the budget documents is a silence so loud it threatens to drown out all the optimism.

Domestic arrears.

The budget allocates Shs317 billion towards domestic arrears in the coming financial year, maybe we should be grateful that it is higher than last year’s sh200b. What it does not tell Ugandans is perhaps even more important: how much government actually owes.

That omission matters.

Any businessman seeking a loan would be expected to disclose his liabilities before discussing his repayment plan. Yet government has told taxpayers how much it intends to pay without disclosing the size of the outstanding bill.

The latest figure publicly cited by Parliament's Finance Committee, drawing on findings of the Auditor General, placed domestic arrears at more than Shs13.8 trillion.

If that figure remains broadly accurate, the Shs317 billion allocation would clear barely 2.3 percent of the stock.

Put differently, government is allocating forty-four times more money to domestic debt refinancing than it is to paying businesses and individuals who have already delivered goods and services to the state.

The contrast is startling.

Domestic debt refinancing will consume Shs13.97 trillion.

Interest payments will absorb another Shs14.11 trillion.

Together, debt-related obligations exceed Shs32 trillion.

Domestic arrears receive Shs317 billion.

From a financial perspective, one understands the logic. Government cannot afford to default on its debt obligations.

From an economic perspective, however, the consequences are profound.

For many businesses, government is their biggest customer.

Contractors build roads. Suppliers deliver medicines, stationery and equipment. Consultants provide services. Landlords rent premises.

Then the waiting begins. Months become years. Loans become non-performing. Interest accumulates. Cash flows collapse. Some businesses survive. Many do not.

In effect, domestic arrears amount to an invisible tax on the private sector. Government collects taxes on time but often pays its bills late.

The irony is that this directly undermines many of the objectives highlighted elsewhere in the budget.

Government is spending trillions through the Parish Development Model, Emyooga, the Agricultural Credit Facility, the Small Business Fund and Uganda Development Bank to support enterprise development.

Yet many businesses are being starved of liquidity simply because government has not paid for goods and services already received.

A supplier owed Shs1 billion by government does not need another government loan.

He needs his money.

Which brings us to corruption.

The budget deserves credit for placing anti-corruption efforts at the centre of its implementation reforms. Procurement reforms, digitisation, stronger audits, accountability charters for accounting officers and tighter oversight are all welcome measures.

The recent willingness by the state to confront high-level corruption allegations is also encouraging.

Uganda has reached a point where corruption is no longer merely a moral issue.

It is an economic threat.

As argued in this column before, corruption's greatest danger is not the money stolen.

Its greatest danger is the perception of unfairness it creates.

History shows that people can endure hardship for long periods. What they struggle to accept is a system that appears rigged.

The French Revolution was as much about inequality and privilege as it was about economics. The Arab Spring similarly reflected growing frustration with systems perceived as benefiting a small elite at the expense of everyone else.

The warning remains relevant.

When corruption becomes widespread, it begins to warp society's moral compass.

The discussion has ceased to be whether public resources were stolen. The discussion has become whether too much was stolen.

That is a dangerous place for any country to find itself.

Yet corruption does not exist in isolation.

Domestic arrears are one of the conditions that allow it to thrive.

Whenever payment depends on navigating a maze of approvals and signatures, opportunities emerge for influence peddlers, middlemen and rent-seekers.

A contractor who has waited two years for payment becomes vulnerable to anyone promising to "help" move a file. Domestic arrears are corruption's quieter cousin.

They create incentives for exactly the kind of behaviour government says it wants to eliminate.

That is why a serious anti-corruption agenda should include more than arrests, investigations and procurement reforms.

It should also include radical transparency around domestic arrears.

Government should publish the full stock of verified arrears.

It should explain how they accumulated.

And it should present a credible timetable for eliminating them.

Uganda's achievements over the last four decades are undeniable.

The challenge today is no longer simply growing the economy. The challenge is improving the quality of growth.

That means ensuring fairness. It means honouring obligations. It means reducing opportunities for corruption before they arise.

And it means recognising that confidence in government is built not only by collecting taxes and making promises, but also by paying bills.

The 2026/27 budget makes a strong statement about fighting corruption.

Its silence on domestic arrears is deafening.

And until that silence is addressed, the fight against corruption will remain only half complete.

A TAX CUT, A REVENUE BOOM AND UGANDA'S MARCH TOWARDS SELF-RELIANCE

There was a line in this year’s Budget Speech that deserved far more attention than the usual debate about roads, oil, industrial parks and public spending.

Domestic revenue is projected to jump from Shs35.7 trillion this financial year to Shs45.6 trillion in FY2026/27, an increase of nearly 28 percent. Even more importantly, Uganda’s tax-to-GDP ratio will rise to 15.9 percent.

At first glance, it sounds like just another budget statistic.

It is not.

It may well be one of the most significant economic milestones in Uganda’s recent history.

For decades, Uganda has been building the foundations of economic growth. Since the late 1980s, the economy has expanded more than tenfold. Tax revenues have grown more than sixtyfold. Exports have diversified from coffee and a handful of commodities into gold, manufactured products, fish, cocoa and services. The country has liberalised its economy, tamed inflation and built critical infrastructure.

Yet despite all this progress, Uganda has often struggled with one persistent challenge: raising enough domestic resources to finance its ambitions.

The consequence has been dependence on borrowing and, historically, donor support.

That is why Finance Minister Henry Musasizi’s revelation that domestic revenues funded 80.9 percent of the discretionary budget this year is so important. Uganda is steadily moving towards financing its development from its own resources.

"The minister correctly described domestic revenue mobilisation not merely as a fiscal objective but as a sovereignty objective...

He is right.

A country that pays its own bills enjoys greater policy independence than one dependent on lenders and donors.

The generation that lived through the Structural Adjustment Programmes remembers that economic assistance often came with conditions. Many of those reforms proved beneficial, but the lesson remains the same: when someone else finances your priorities, they inevitably influence them.

When you finance your own development, you retain the freedom to chart your own course.

That is why the projected 28 percent jump in domestic revenue matters.

Yet perhaps the most politically significant measure in the entire budget was not the revenue target.

It was the decision to increase the Pay As You Earn (PAYE) threshold for the first time in more than three decades...

For years, Ugandan workers have quietly borne the burden of what economists call fiscal drag. Salaries increased, prices increased and inflation steadily eroded purchasing power, but the tax-free income threshold remained frozen in time.

Workers found themselves paying more tax even when their real incomes had barely improved.

The government has finally acknowledged that reality.

The increase in the PAYE threshold is long overdue.

It means workers will retain more of what they earn. It provides additional spending power for households grappling with school fees, rent, healthcare costs and transport expenses.

In practical terms, the change amounts to a salary increase.

A worker who was previously paying tax on the first Shs500,000 of monthly income will now retain an additional Shs30,000 every month because that portion of income is no longer taxed. Effectively, government has delivered a Shs30,000 monthly pay rise to many formally employed Ugandans without requiring employers to increase wages.

Over a year, that translates into Shs360,000.

The Treasury estimates that the measure will cost about Shs96 billion in foregone revenue. But that is a small price to pay for a reform that was overdue by more than three decades. In truth, the adjustment could—and arguably should—have been larger. Inflation has steadily eroded the value of the original threshold over the years. Had the tax-free band been adjusted periodically to reflect changes in the cost of living, today's threshold would likely be significantly higher.

Yet the symbolism matters. Government is effectively sharing some of the gains from stronger revenue performance with taxpayers. At a time when domestic revenues are projected to grow by nearly Shs10 trillion, foregoing Shs96 billion to provide relief to workers represents less than one percent of the additional revenue being raised. It is a modest concession, but a welcome one.

More importantly, it signals a welcome shift in thinking.

"The purpose of taxation is not to maximise taxes. The purpose is to maximise economic activity...

A growing economy ultimately generates more revenue than an overtaxed one.

That is one reason this budget deserves credit for focusing more on expanding the tax base than imposing new taxes.

The distinction is critical.

For too long, Uganda’s tax debate has focused on how much more government can collect from the same formal-sector taxpayers.

Yet the formal economy remains relatively small.

Millions of Ugandans remain outside the tax net, not because they are evading taxes, but because their economic activity remains informal, subsistence-based or too small to tax effectively.

The answer is not squeezing existing taxpayers harder.

The answer is monetisation.

That is precisely why the budget theme remains focused on commercial agriculture, industrialisation, expanding services, digital transformation and market access.

The logic is straightforward.

A subsistence farmer generates little taxable activity because little income enters the formal economy.

A commercial farmer purchasing inputs, accessing finance, processing produce and selling into organised markets creates taxable economic activity throughout the value chain.

The same applies to manufacturing, tourism, ICT, logistics and financial services.

This is where the budget’s emphasis on the ATMS sectors—agro-industrialisation, tourism, minerals and science, technology and innovation—becomes important. These are not merely spending priorities. They are future tax bases. They are the engines that will generate the jobs, incomes and enterprise growth necessary to sustain higher revenues without imposing higher tax rates.

The challenge now is to maintain momentum.

A tax-to-GDP ratio of 15.9 percent represents significant progress, but it remains below the levels achieved by many countries that successfully transitioned from low-income to middle-income status. Most sustain tax ratios above 20 percent.

Uganda still has ground to cover.

Fortunately, technology is making that journey easier.

The rapid growth of digital payments, e-invoicing, mobile money and integrated government databases offers opportunities to broaden compliance while reducing the cost of collection. The ideal tax system is one where paying taxes becomes seamless rather than adversarial.

There is another reason why stronger domestic revenue mobilisation matters today.

Uganda stands on the threshold of commercial oil production.

Many resource-rich countries have made the mistake of becoming dependent on oil revenues while neglecting their domestic tax systems.

The wiser approach is the one this budget appears to embrace: build a strong domestic revenue base first and treat oil revenues as an accelerator rather than a substitute.

Oil wells eventually run dry.

A productive economy driven by farmers, entrepreneurs, manufacturers, innovators and exporters can sustain prosperity indefinitely.

Ultimately, the most important story in this budget is not the size of expenditure, the roads being built or even the coming oil revenues.

It is a subtle but profound shift in philosophy.

For much of the last four decades, Uganda’s economic story was about stabilisation, liberalisation and growth.

The next chapter is about transformation.

Transformation requires resources.

Resources require production.

Production requires people participating fully in the money economy.

That is why the jump in domestic revenues and the increase in the PAYE threshold are two sides of the same coin.

One reflects a government becoming financially stronger.

The other reflects citizens being given a little more room to breathe.

A successful economy requires both.

As the new cabinet settles into office and implementation of the NRM manifesto begins, the real work starts now. As the budget itself notes, Uganda’s challenge is no longer merely growing the economy. The challenge is ensuring that growth translates into jobs, enterprise development, rising household incomes and prosperity for ordinary Ugandans.

If Uganda can continue expanding its revenue base while simultaneously improving the lives of its citizens, this year’s budget may be remembered not for how much government spent, but for how much closer the country came to paying for its own future.

THE BUSINESS CASE FOR ARSENAL'S RETURN TO THE SUMMIT

The skying of Gabriel’s penalty in the finals of the Champion’s League final last weekend should not detract from a greater business story surrounding the return of Arsenal to the summit of European soccer.

Arsenal's return is often explained through the lens of Mikel Arteta's managerial brilliance, smart recruitment, and a talented young squad. All of that is true.

But the deeper story began nearly three decades ago when Arsenal made a decision that would fundamentally reshape the club's future: leaving their old home Highbury and building the Emirates Stadium.

What Arsenal are enjoying today is the payoff from a long-term investment whose benefits took almost twenty years to fully materialize. It is a story of delayed gratification, strategic patience, and enduring short-term pain for long-term gain.

It is also a story with important lessons for Uganda.

The Highbury Problem

By the late 1990s Arsenal were among Europe's elite clubs. Under Arsène Wenger, they won league titles in 1998, 2002 and 2004, including the famous Invincibles season.

Yet beneath the success lay a structural weakness.

Highbury, though iconic, held only about 38,000 spectators. Arsenal simply could not generate the revenues of rivals such as Manchester United, whose Old Trafford accommodated more than 67,000 fans. Football was becoming increasingly commercialized, and financial strength was becoming as important as footballing excellence.

Arsenal faced a choice: preserve the romance of Highbury or build a platform for future growth.

They chose growth.

Paying for the Future

The Emirates Stadium was one of the biggest infrastructure projects ever undertaken by a football club.

The move transformed Arsenal's business. Matchday revenues more than doubled, rising from roughly £35-40 million (sh200b) annually at Highbury to more than £90 million after the move. Commercial opportunities expanded dramatically while the club's global profile grew.

The numbers tell the story. Around the time Arsenal committed to the Emirates project, the club's enterprise value was estimated at less than £500 million (about sh2.5 trillion). Annual revenues hovered around £100-140 million.

Today Arsenal generate nearly £700 million in annual revenues and are valued at approximately £2.5 billion. In dollar terms, the club's valuation has risen from roughly US$500 million in the early Emirates era to more than US$3.4 billion today.

In other words, Arsenal's value has increased more than five-fold while revenues have expanded by a similar magnitude. The trophies may have disappeared for long stretches, but value creation did not. The club was quietly transforming itself from a successful football team into one of the world's most valuable sporting institutions.

But none of this came cheaply.

The stadium had to be financed. Debt had to be serviced. Costs had to be controlled.

And the burden fell largely on Wenger.

Wenger's Hidden Achievement

History remembers Wenger for the Invincibles. Yet his greatest contribution may have come after the trophies.

While Chelsea benefited from Roman Abramovich's billions and Manchester City later enjoyed Abu Dhabi's vast wealth, Arsenal were effectively paying a mortgage.

Transfer spending was constrained. Wage bills were tightly managed. Star players departed. Thierry Henry, Cesc Fàbregas, Samir Nasri and Robin van Persie all left during this period.

Supporters interpreted these departures as a lack of ambition.

The reality was that Arsenal were building tomorrow while trying not to lose today.

Wenger managed one of football's most difficult balancing acts. Between 1998 and 2016 Arsenal qualified for the Champions League every season. Those appearances generated crucial revenues that helped sustain the club during the Emirates years.

The famous jokes about Arsenal repeatedly finishing fourth overlooked an important truth: fourth place was helping pay for the stadium.

What looked like stagnation was actually strategic endurance.

Two Steps Forward, Three Steps Back

For much of the Emirates era Arsenal appeared trapped in a cycle of two steps forward and three steps back.

The club would develop a promising team only to lose key players. Rivals seemed to move ahead faster. Supporters became increasingly impatient.

Yet beneath the surface, the fundamentals were improving.

The debt burden was shrinking relative to revenues. Commercial income was growing. Arsenal's global reach was expanding. Most importantly, the club's enterprise value was compounding.

This is perhaps Wenger's most underrated legacy. He helped oversee a period in which Arsenal's value increased by billions of pounds despite operating with a budget smaller than many rivals. The football may not always have reflected progress, but the business certainly did.

The trophies arrived much later than fans expected.

The value creation arrived first.

Today Arteta is harvesting crops planted long before his arrival.

The lesson? Transformative investments rarely produce immediate results. Often they make things harder before they make things better.

Uganda's Arsenal Moment

The parallel with Uganda is difficult to ignore.

Over the last four decades Uganda has averaged roughly 6 percent annual economic growth. GDP has expanded more than tenfold. Tax revenues have risen more than sixty-fold. Infrastructure has improved dramatically. Exports have diversified from a handful of agricultural commodities into a much broader basket.

Yet, like Arsenal at Highbury, Uganda may be approaching the limits of what its current model can deliver.

The next leap will require bigger bets.

Infrastructure investments in energy, transport and logistics. Human capital investments in education, healthcare, science and technology. The creation of new markets in agro-industrialization, mineral beneficiation, financial services, tourism and digital services.

Some of these investments will initially feel like Arsenal's Emirates years. Resources will be stretched. Returns may appear disappointing. Progress may seem frustratingly slow.

There will be moments when it feels like two steps forward and three steps back.

But Arsenal's story reminds us that the most important investments are often invisible at first. The stadium looked like a burden before it became an advantage. The debt looked like a constraint before it became a platform for growth. The sacrifice looked like stagnation before it became success.

The challenge for Uganda is not whether it can continue growing. It is whether it has the discipline (no corruption), patience and courage to make the long-term investments necessary to move from growth to transformation.

Arsenal's return to the summit was not built in a season. It was built over twenty years.

That is perhaps the important business lesson.

UGANDA’S NEXT ECONOMIC FRONTIER

A few years ago, I was chatting with a businessman returning from Asia. He told me something that has stayed with me ever since. “The difference between us and them,” he said, “is that over there everybody seems to be trying to produce something. Here, too many people are trying to position themselves between the producer and the customer.”

That observation neatly captures Uganda’s next economic challenge.

This year marks 40 years since the NRM took power in 1986. Whatever one’s politics, the scale of economic transformation during that period is undeniable. Uganda’s economy has grown more than ten-fold. Tax revenues have increased roughly 60-fold. Inflation was tamed, foreign exchange shortages disappeared and sectors like telecommunications, digital payments and modern financial services emerged.

"The liberalisation of the economy fundamentally altered Uganda’s trajectory. It unleashed private initiative, attracted foreign investment and diversified exports beyond coffee and cotton into fish, flowers, gold, cement, steel products and regional trade services.

Forty years ago Uganda was largely surviving. Today it is functioning.

But the next challenge is no longer recovery. It is transformation — ensuring the gains of growth are distributed more equitably, mainly that productive sectors create millions of jobs, especially for young people.

With the announcement of the new Cabinet, the real work now starts.

The first and most urgent challenge is corruption.

"For years corruption served a political utility function, helping maintain patronage networks and political coalitions. But like all political tools, there comes a point when the side effects outweigh the benefits.

That point may well have arrived.

Corruption is now an economic threat. It distorts incentives, reallocates capital from productive enterprise to political rent-seeking and deepens wealth inequalities in socially dangerous ways. Young people stop admiring entrepreneurs and instead admire brokers and politically connected dealmakers. Economic energy shifts from creation to extraction.

No country develops sustainably that way.

The second challenge is improving the business environment so that incentives sit squarely with producers rather than commission agents and rent seekers.

At the heart of every prosperous country is a simple formula: production must pay better than speculation.

A farmer who grows maize should earn more than the broker standing between the farmer and the market. A manufacturer should thrive more than a politically connected importer gaming procurement systems.

But too often in Uganda, the opposite happens.

The productive economy carries the tax burden while rent-seeking flourishes in the shadows. Businesses spend too much time navigating bureaucracy, delayed government payments and regulatory overlap instead of expanding production.

Uganda also needs clarity about how government intervenes in the economy.

East Asian economies did not subsidise businesses indiscriminately. Governments strategically backed firms capable of competing in export markets and generating foreign exchange. Support was tied to performance and competitiveness.

By contrast, many import substitution schemes in Africa degenerated into protection rackets for politically connected businesses. Shielded from competition, such firms became financial black holes enriching a few cronies at the expense of taxpayers and consumers.

Government intervention should therefore focus on unlocking Uganda’s genuine competitive advantages.

Agriculture remains the clearest example. Uganda has fertile soils, good climate and abundant labour. The goal should not merely be producing raw commodities but building globally competitive agro-processing industries.

Tourism is another underexploited goldmine. Few countries combine Uganda’s biodiversity and climate in such a compact geography. Yet tourism still performs below potential because of weak infrastructure and fragmented value chains.

Education and health services could position Uganda as a regional hub if quality improves. Logistics and financial services naturally position Uganda as a gateway to the Great Lakes region, while mining should support industrialisation rather than simply exporting raw minerals.

The third challenge is financing infrastructure sustainably through infrastructure bonds.

Uganda’s infrastructure deficit remains enormous. Roads, railways, irrigation systems and logistics networks require massive long-term financing. Yet excessive dependence on external borrowing exposes the country to exchange rate risks and rising global interest costs.

Uganda has quietly built pools of long-term savings through institutions like NSSF, insurance companies and pension schemes. Infrastructure bonds could channel these savings into productive national assets while deepening domestic capital markets.

Infrastructure is not consumption. It is economic oxygen.

The fourth challenge is guarding against the oil curse.

Oil has destroyed as many countries as it has enriched. The danger is not the oil itself but what oil revenues do to political and economic behaviour. Easy money can weaken tax discipline, fuel corruption and undermine agriculture and manufacturing competitiveness.

"Uganda must resist the temptation to consume oil revenues politically before investing them productively. The smartest oil economies use oil revenues to diversify away from oil.

Finally, agriculture.

Agriculture remains Uganda’s largest employer and perhaps its greatest untapped wealth creator. The real challenge now is mass job creation, and no sector can absorb labour at scale faster than agriculture linked to agro-processing, logistics, storage and export marketing.

For too long agriculture discussions have focused narrowly on production. But agriculture is a value chain, not merely farming. The real wealth often lies beyond the farm gate.

The first 40 years were about rebuilding a collapsed economy. The next phase must be about transforming a functioning economy into a broadly prosperous one.

Stability was the foundation. Transformation is now the mission.