Civil Society Organizations (CSOs) have raised concerns over the 2025/26 National Budget Framework Paper (NBFP), highlighting funding gaps in key sectors such as trade, industrialization, and private sector development.
Their position paper, submitted last month to the Parliamentary Committee on Tourism, Trade, and Industry, chaired by Boniface Okot, underscores issues like inadequate financing for trade facilitation, high business costs, and limited access to affordable credit.
The analysis was developed through a participatory process involving the Civil Society Budget Advocacy Group (CSBAG), Private Sector Foundation Uganda (PSFU), the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI-Uganda), BRAC Uganda, and the Global Consumer Centre (CONSENT
Budget trends and implications
The trade and industry budget has fluctuated in recent years. In FY 2022/23, the sector was allocated sh1.653 trillion, with 97.4% (sh1.610 trillion) released. However, bureaucratic delays in finalizing agreements hampered fund disbursement. The FY 2023/24 budget saw a 19% increase to sh1.96 trillion, but by December 31, 2023, only sh929.83 billion (48.7%) had been disbursed, with just 37.9% utilized.
For FY 2024/25, the budget grew by 5.9% to sh2.02 trillion, mainly to support the capitalization of Parish Development Model (PDM) SACCOs. However, this upward trend is set to reverse, with the FY 2025/26 allocation projected to drop to sh1.89 trillion a concerning decline in funding for trade and industry.
Trade sector performance under NDP III
Under the National Development Plan (NDP) III, the government aimed to enhance private sector competitiveness through increased business formalization, expanded access to non-commercial lending, and greater participation of local firms in government contracts. However, implementation has been sluggish. By the FY 2022/23 Mid-Term Review, only 8% of indicators had been achieved, while 80% remained unmeasured due to data collection and execution challenges.
The Funding Crisis at UNBS
A key concern raised in the CSO position paper presented by Jonathan Lubega, policy analyst at SEATINI-Uganda, is the severe underfunding of the Uganda National Bureau of Standards (UNBS). In their view, the bureau plays a vital role in enhancing Ugandan product competitiveness through standardization. However, UNBS receives just sh56 billion annually against a required sh200 billion, significantly constraining its ability to conduct quality enforcement.
Despite budget limitations, UNBS has made commendable strides, including automating certification processes and increasing the number of certified exports to 4,942 products in FY 2022/23, surpassing its 4,500 target. However, high laboratory testing fees remain a burden for Micro, Small, and Medium Enterprises (MSMEs), as most testing is focused on exports rather than the local market.
The position paper calls for increased funding to UNBS, particularly for the construction and operationalization of regional laboratories to decentralize services. Notably, the Auditor General’s report for June 2023 revealed that UNBS collected sh64.9 billion, 47% above its projected revenue indicating its potential to generate funds for operations if properly supported.
The high cost of doing business stifles growth
The private sector faces a harsh business environment characterized by high interest rates, excessive taxation, and volatile exchange rates. Although the April 2024 Economic Performance Report by the Ministry of Finance paints a positive picture of the business landscape, entrepreneurs continue to grapple with high costs.
Electricity prices, a major concern, remain above the government’s target of 5 cents per unit. Moreover, regional disparities in electricity access exacerbate economic inequalities while Kampala enjoys a 61.7% connectivity rate, West Nile and Karamoja lag at 0.9% and 1.1%, respectively.
Lending rates have slightly declined from 20.3% in FY 2017/18 to 18.6% in FY 2022/23, but they remain high compared to regional peers such as Kenya (15%), Tanzania (17%), and Rwanda (17%). This makes the businesses less competitive, restricting expansion and innovation.
The CSOs recommend increasing non-commercial lending to the private sector through the Development Bank and other financial schemes to provide affordable capital. Additionally, the Ministry of Energy should prioritize rolling out solar power initiatives for rural areas where grid extension is impractical.
Limited access to affordable and inclusive financing
The financial inclusion efforts have seen modest progress. According to the 2018 Fin Scope Survey, formal financial account ownership rose from 54% in 2013 to 58% in 2018. Yet, private sector credit remains low at 12.81% of GDP well below the target of 17.6%. The high cost of borrowing, averaging 20%, continues to choke business growth, forcing some enterprises into closure.
Start-ups and youth entrepreneurs face the greatest financing barriers due to banks’ risk aversion and stringent loan requirements. The CSOs propose increasing access to financial services in rural areas and expanding digital financial inclusion to bridge the gap between urban and rural financial accessibility.
Lack of prioritization for trade negotiations:
Despite the ambition to expand exports under initiatives such as the African Continental Free Trade Area (AfCFTA), funding for trade negotiations remains conspicuously absent from the NBFP. The current focus is on harmonizing concluded negotiations rather than supporting ongoing talks, such as the AfCFTA third-phase discussions and World Trade Organization (WTO) engagements.
The CSOs advocate for adequate funding to the National Trade Sector Advisory Council to facilitate meaningful trade negotiations. Parliament and relevant committees should also be regularly briefed to ensure informed oversight and policy direction.