The fiscal performance in March 2025 painted a mixed picture, with tax collections falling short across all major revenue categories while public spending increased.
According to the performance of the economy report by the ministry of Finance, the government collected sh2.2 trillion in tax revenue during March 2025, falling short of its monthly target of sh2.3 trillion by sh92.16 billion.
Domestic tax performance
Direct domestic taxes, including corporate tax, Pay as You Earn (PAYE), and withholding tax, amounted to sh807.51 billion, falling sh31.59 billion below the target. The biggest misses came from withholding taxes on dividend payments, foreign transactions, and interest on treasury bills.
Meanwhile, indirect domestic taxes also underperformed, with a shortfall of sh5.34 billion. This category collected sh614.02 billion against a target of sh619.26 billion. The biggest gaps were seen in excise duty (short by sh2.88 billion) and Value Added Tax (VAT) (short by sh2.46 billion).
This decline was attributed to the decline in consumption-based tax receipts to reduced spending on excisable goods such as beer, spirits, soft drinks, and sugar, hinting at weakened consumer demand or increasing price sensitivity in households.
Trade taxes hit hardest
The most significant blow to March’s tax revenue came from **international trade taxes, which collected sh875.94 billion, compared to a target of sh927.20 billion, registering a whopping sh51.26 billion shortfalls.
The primary culprit was petroleum duty, affected by reduced petroleum imports. The report cited port-related limitations in Mombasa, where fuel import quotas and processing limits continue to suppress trade volumes.
Mixed bag for cumulative revenue
Despite the underperformance in March, cumulative tax collections for the current financial year (July 2024 – March 2025) totaled sh20,923.23 billion, slightly surpassing the target by sh45.08 billion, achieving a 100.2% performance rate.
This shows that while monthly collections fluctuate, the broader trajectory remains largely on course, thanks in part to earlier months of over performance.
Non-Tax revenue still lagging
The outlook for non-tax revenues, however, is less optimistic. In March 2025, the government collected sh136.27 billion from other revenue sources, far below the monthly target of sh211.07 billion, leaving a shortfall of sh74.8 billion.
On a cumulative basis, non-tax revenue from July 2024 to March 2025 stood at sh1.538 trillion, still short of the targeted sh1.6 trillion, reflecting persistent inefficiencies in collecting administrative fees, licenses, fines, and other government charges.
Government spending goes up
On the expenditure front, total spending for March reached sh3.163 trillion, exceeding the program amount of sh3.128 trillion. The excess was largely attributed to higher-than-projected compensation of employees, interest payments, and grants to local governments and institutions.
Specifically, wage payments amounted to sh376.68 billion, slightly above the planned sh373.17 billion, fueled by supplementary allocations to Ministries, Departments and Agencies (MDAs) that faced wage shortfalls.
More notably, grants to local governments, tertiary institutions, and referral hospitals totaled sh1.238 trillion, surpassing the planned sh1.201 trillion. While this demonstrates the government’s commitment to timely delivery of social services such as education and healthcare, it also strains the already tight fiscal envelope.
Slower infrastructure spending
On the development front, the net acquisition of non-financial assets which primarily reflects infrastructure investments was far below expectations. Only sh108.68 billion was spent in March 2025, compared to a programmed amount of sh437.55 billion.
The sharp under-expenditure was attributed to slower project implementation, possibly due to bureaucratic delays or procurement bottlenecks.
Government borrowing remains strong
Despite revenue shortfalls, the government raised a substantial sh1.847 trillion in March 2025 through the sale of securities. This included sh715.80 billion from Treasury Bills and sh1.131 trillion from Treasury Bonds. Of the total raised, sh1.360 trillion was used to finance the budget, while sh487.23 billion went toward refinancing maturing securities.
The continued reliance on domestic borrowing raises questions about the sustainability of public debt, especially as interest payments edge upward.
Shilling strengthens against dollar, weakens elsewhere
Currency-wise, the Ugandan Shilling strengthened against the US Dollar, appreciating by 0.3% to trade at an average of sh3,667.63/USD in March 2025. This was supported by increased Dollar inflows from remittances, portfolio investments, and foreign direct investment, particularly in the oil sector.
However, the Shilling’s strength was not uniform. It weakened against the British Pound and Euro, depreciating by 2.6% and 3.5% respectively, underscoring the influence of broader global currency dynamics on Uganda’s external trade position.
