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.
