Uganda’s economy closed the 2025/26 financial year on a strong note, with Government registering a fiscal surplus of Shs517.07 billion in June, reversing earlier projections of a deficit and underscoring improved revenue performance.
According to the latest report released by the Ministry of Finance, Planning and Economic Development, the surplus was largely driven by stronger domestic revenue mobilisation, enhanced tax administration and lower-than-planned expenditure on non-financial assets. Government had initially projected a deficit of Shs690.73 billion for the month.
Revenue collections, including grants, amounted to Shs5.81 trillion, representing 116 percent of the target of Shs5.01 trillion. This translated into a surplus of about Shs800.9 billion, reflecting improved taxpayer compliance and sustained economic activity during the final month of the financial year. Domestic revenue collections stood at Shs5.72 trillion, exceeding the target by 18.2 percent, with tax revenue contributing Shs5.57 trillion and non-tax revenue accounting for Shs156.33 billion.
The strong performance was largely driven by direct domestic taxes, particularly corporation tax, Pay As You Earn (PAYE) and withholding tax, all of which surpassed their targets. Consumption taxes also performed better than expected, supported by higher collections from Value Added Tax and excise duties on products such as beer, sugar and bottled water, as well as increased activity in the construction, wholesale and retail sectors. Taxes on international trade equally registered strong growth, boosted by petroleum duty, import VAT, import duty and the infrastructure levy.
The report indicates that economic activity continued to improve during June, with high-frequency indicators pointing to sustained expansion. Both the Purchasing Managers’ Index (PMI) and the Composite Index of Economic Activity (CIEA) recorded improvements compared to previous readings, signalling continued recovery across key sectors of the economy.
Private sector confidence remained firmly in positive territory, with the Business Tendency Index recorded at 54.4, well above the 50-point threshold that signals optimism. The ministry attributed this confidence to improving prospects in both domestic and external demand, supported by a stable macroeconomic environment.
The financial sector also posted encouraging developments during the month, with the Uganda shilling appreciating against major international currencies. It strengthened by 1.4 percent against the US dollar, 2.8 percent against the euro and 2.6 percent against the British pound, supported by increased foreign exchange inflows from commodity exporters and offshore investors.
At the same time, lending rates declined slightly while private sector credit expanded to Shs26.72 trillion, largely driven by increased lending to the manufacturing and trade sectors. Investor appetite for government securities remained strong, enabling Government to raise Shs2.5 trillion through Treasury bill and bond auctions.
Uganda’s export sector also maintained a strong performance despite a slight month-on-month decline. Merchandise export earnings rose by 12.8 percent year-on-year to USD1.346 billion in May 2026, up from USD1.193 billion recorded in May 2025. The growth was mainly driven by higher earnings from gold, tobacco, oil re-exports and electricity.
Gold exports remained the largest contributor, with earnings surging by 67.7 percent to USD814.78 million due to higher export volumes and stronger international prices. However, coffee export earnings declined sharply, reflecting lower export volumes and falling global prices amid increased supply from other producing countries.
Cumulatively, merchandise exports for the period July 2025 to May 2026 reached USD14.47 billion, representing a 34.4 percent increase compared to the same period of the previous financial year. The Middle East remained Uganda’s largest export destination, followed by the East African Community and Asia.
On the import side, Uganda’s merchandise import bill increased by 12.5 percent year-on-year to USD1.462 billion, largely driven by increased imports of machinery, vehicles, petroleum products, gold, plastics and rubber. Cumulative imports for the July 2025 to May 2026 period rose by 20.4 percent to USD15.92 billion. Despite this annual growth, imports declined slightly compared to April 2026 due to reduced private sector imports of gold, machinery, base metals and vehicles.
As a result, the merchandise trade deficit widened to USD115.69 million in May 2026, with imports continuing to outpace export earnings.
Inflation edged up during June, with annual headline inflation rising to 3.7 percent from 3.2 percent in May, mainly driven by higher domestic fuel prices which pushed up the cost of goods and services.
Government expenditure on recurrent activities amounted to Shs3.53 trillion, slightly above the planned level due to supplementary budgets and end-of-financial-year spending by ministries, departments and agencies. Development expenditure stood at Shs1.76 trillion, representing 79.8 percent of the planned budget, with spending largely directed towards land acquisition for infrastructure projects, procurement of security equipment and road construction works.
Within the East African Community, Uganda recorded trade surpluses with the Democratic Republic of Congo, South Sudan and Rwanda, but continued to register deficits with Kenya, Tanzania and Burundi. The report attributes the persistent trade imbalances to non-tariff barriers and high levels of imports from the region, although partner states have agreed to eliminate such barriers starting in the 2026/27 financial year.
