In May 2025, the government recorded a fiscal deficit of sh3.148 trillion, exceeding the projected deficit of sh2.372 trillion for the month.
This wider gap between revenue and expenditure was largely due to higher-than-planned government spending, coupled with lower-than-expected tax and non-tax revenue collections.
Revenue Collections Below Target, Tax Surplus
Preliminary revenue figures for May show that total collections amounted to sh2.694 trillion, achieving 98.3% of the planned target of sh2.741 trillion. Tax revenue constituted the bulk of this amount at Sh2.376 trillion, while non-tax revenues and grants contributed Sh177.10 billion and Sh140.92 billion, respectively.
Tax revenues posted a modest surplus of sh2.00 billion compared to the target of sh2.374 billion. This positive variance was mainly driven by international trade and transaction taxes, which surpassed expectations by sh13.48 billion against the planned sh929.46 billion.
 The overperformance in this category was primarily attributed to higher-than-anticipated petroleum duty collections during the month.
Corporation tax collections also outperformed the plan, posting a surplus of sh73.74 billion in May. However, this gain was offset by significant shortfalls in Pay-As-You-Earn (PAYE) and withholding tax collections. The combined underperformance in these areas negatively impacted overall income tax revenues, resulting in a net shortfall of sh1.75 billion for the month.
Consumption taxes totaled sh629.00 billion, falling short of the target by sh16.32 billion. Both Value Added Tax (VAT) and excise duty underperformed relative to expectations. Key contributors to this shortfall included reduced collections from items such as wine and spirits, sugar, and phone talk time, reflecting shifting consumer behavior or economic dynamics during the period.
Non-tax revenue collections in May reached sh177.10 billion, falling short of the monthly target of sh197.75 billion, representing an 89.5% performance rate. This under-collection in non-tax revenue further strained the government’s fiscal position.
Government Spending Surpasses Planned Budget
On the expenditure side, government spending in May totaled sh4.521 trillion, exceeding the planned outlay of sh4.179 trillion by 8.2%. The higher spending was driven primarily by increased grant disbursements, including transfers to local governments, funds allocated to the Atiak Sugar Factory, and capitalization efforts for the Uganda National Oil Company (UNOC), which received supplementary budget allocations.
In addition to recurrent expenditures, the government invested heavily in non-financial assets, spending sh1.321 trillion in May on asset acquisition. This outturn surpassed the programmed amount of sh905.14 billion, driven in part by the robust performance of development projects, particularly those supported by the World Bank during the period.
Fiscal Outlook: Balancing Revenue Gaps and Elevated Spending
The combination of these revenue and expenditure dynamics resulted in a significant fiscal gap for May, highlighting ongoing challenges in balancing public finances. While tax revenue outperformance in certain categories provides some relief, under collections in income and consumption taxes alongside elevated spending underscore the need for continued fiscal prudence.
The Ministry of Finance will likely monitor these trends closely, particularly the impacts of supplementary budgets and grant transfers, as well as efforts to broaden the revenue base and improve collection efficiency in subsequent months.
