Foreign Direct Investment (FDI) and remittance inflows declined during the second quarter of the 2025/26 financial year, while tourism receipts registered strong growth, according to the Ministry of Finance Post-Election Economic and Fiscal Update.
During the period, the Ministry of Finance indicates that FDI inflows declined by 6.8 percent to $737.8m, down from $791.88m during the same period of the previous financial year.
However, the Ministry noted that the decline was relatively modest compared to previous election cycles.
Remittance inflows from Ugandans living abroad also declined by 2.3 percent to $456.22m in the second quarter of the 2025/26 financial year, compared to $467.05m during the previous financial year.
The decline was largely attributed to weaker economic conditions in key source markets, particularly in the Middle East and Europe, which affected the earning capacity of migrant workers.
In contrast, tourism receipts recorded strong growth during the period, increasing by 13.3 percent to $395.69m from $349.19m in the same quarter of the 2024/25 financial year.
The growth was driven by higher spending per visitor, longer stays, increased international arrivals, and stronger demand for high-value leisure travel.
The report also indicates that the broader economy remained stable in the aftermath of the general elections, supported by strong economic growth, low inflation, and a stable exchange rate.
Preparations for oil production have also been carefully managed to ensure that future petroleum revenues contribute to sustainable and inclusive growth.
Meanwhile, government expenditure during the third quarter of the 2025/26 financial year fell below target despite significant spending on election preparations.
Public expenditure, comprising recurrent expenses and the acquisition of non-financial assets, amounted to Shs12.282 trillion between January and March 2026, compared to the planned Shs13.672 trillion.
The lower-than-expected expenditure suggests that government finances did not come under excessive pressure from election-related spending despite the election period.
The Ministry explained that both recurrent expenditure and development spending performed below their quarterly targets.
This was partly due to the frontloading of expenditure in the second quarter of the 2025/26 financial year to finance election preparations and infrastructure projects.
As a result, funds released during the third quarter were lower than originally programmed, leading to reduced spending levels.
Total recurrent expenditure stood at Shs10.5 trillion against a target of Shs11.47 trillion, translating into a performance rate of 95.3 percent.
The shortfall was mainly recorded under purchases of goods and services, grants, and other expenditure categories.
Spending on the acquisition of non-financial assets reached Shs1.78 trillion against a planned Shs2.19 trillion, representing 81.3 percent of the quarterly target.
The Ministry attributed the underperformance largely to implementation challenges affecting externally financed development projects, including delays in meeting counterpart funding obligations and lengthy procurement processes that slowed project execution and disbursement.
As of April 2026, government had spent Shs1.508 trillion on election-related activities.
Of this amount, the Electoral Commission accounted for the largest share at Shs1.146 trillion. Uganda Police Force spent Shs347.91b, while Uganda Prisons Service spent Shs13.75b.
Permanent Secretary and Secretary to the Treasury Ramathan Ggoobi said the fiscal deficit for the 2025/26 financial year had been revised downward from 7.8 percent to 7 percent of Gross Domestic Product, which ‘reflects lower than projected expenditure outturns, particularly on externally financed projects whose performance remains low’.
‘The successful conclusion of the general elections allows us to continue strengthening the efficiency and effectiveness of fiscal policy to increase productivity and speed up the process of socio-economic transformation in line with government aspirations.’
Preliminary data show that government operations during the third quarter resulted in a fiscal deficit, or net borrowing requirement, of Shs3.74 trillion, lower than the planned deficit of Shs4.33 trillion.
The smaller deficit was mainly driven by lower-than-planned expenditure, which offset the impact of revenue and grant shortfalls.
Total revenue collections, including grants, amounted to Shs8.542 trillion during the January-March period, representing 91.5 percent of the quarterly target of Shs9.335 trillion. This translated into a shortfall of Shs792.51b.
Both domestic revenue and grants performed below target.
Domestic revenue collections reached 97.1 percent of the target of Shs8.714 trillion, resulting in a shortfall of Shs251.25b due to lower-than-expected collections from non-tax revenue sources.
Non-tax revenue recorded a shortfall of Shs372.25b against a target of Shs824.27b, mainly due to lower collections from mining fees and royalties, as well as reduced receipts from police express penalties and other sources.
However, tax revenue collections exceeded expectations, posting a surplus of Shs121b against a target of Shs7.89 trillion. The stronger performance was driven by higher-than-target collections from taxes on goods and services and taxes on incomes, profits, and gains.
Grant inflows remained significantly below target during the quarter, with government receiving Shs79.52b against a projected Shs620.78b due to lower-than-expected budget support disbursements stemming partly from compliance and administrative delays in meeting project-specific milestones.
To address the challenge, the Ministry said it is strengthening oversight mechanisms to accelerate project implementation and facilitate timely grant disbursements.