Economists are widely describing it as a classic case of taking one step in front and two behind. Barely weeks after the National Treasury indicated in its second quarter releases for financial year (FY) 2026/2027 that nearly Shs3 trillion will be saved after directing Ministries, Departments and Agencies (MDAs) to halve expenditure on fuel, travel, workshops and consumables, the government has contrived to shoot itself in the foot. This came to light after a circular from the National Treasury indicated an upward revision of duty-facilitating allowance rates for selected government workers.
In a letter dated September 21, the Ministry of Finance, Planning and Economic Development (MoFPED) directed implementers of the Public Investment and Asset Management for Growth and Resilience Operation (PIM Plus), the Resource Enhancement and Accountability Programme (REAP), the Uganda Intergovernmental Fiscal Transfers Programme (UgIFT) and Funds Coordination for Global Fund Grants to adopt allowance rates provided for under Circular Standing Instruction No. 6 of 2018.
The letter, signed by Patrick Ocailap on behalf of the Permanent Secretary/Secretary to the Treasury (PSST), also directs the implementing agencies to rationalise their planned activities to fit within the available resources for the FY2026/2027 and incorporate the revised rates into their budgets from the FY2027/2028 onwards.
‘I am worried that this is not the right time to increase salaries and government expenditure. I do not know whether the money has already been provided for in the budget, but if the increases lead to higher public expenditure, they could fuel inflation and put additional pressure on the economy,’ Prof Ezra Suruma, an economist and former Finance minister, said.
‘This is a difficult time. Increased expenditure would stimulate demand at a time when supply is constrained by weather-related challenges and the effects of war, potentially driving prices even higher. This is a time for everyone to exercise restraint in spending,’ he added.
Mr Ocailap this week clarified that ‘besides being in the budget, they [the revised allowances] are equally subjected to the available cash limits, which are issued every quarter.’
Broadening the lens
Mr Julius Mukunda, the executive director of the Civil Society Budget Advocacy Group (CSBAG), said there are two key issues to understand about the circular on allowances. First, he said the Ministry of Finance is reminding government agencies to adhere to the existing approved allowance rates, which were reviewed in 2018. The review covered public servants and politically elected leaders. He explained that some government projects have been operating under separate allowance schedules, prompting the ministry to push for uniform rates across government.
Mr Mukunda, however, questioned whether the government was practising the same financial restraint it was demanding from others. He said the circular presented an opportunity for the government to review the allowance rates established in 2018 in light of the prevailing economic conditions. ‘[The government] is telling us to tighten our belts, but it is not tightening its own belt. This would be a good time to review the allowance schedules that have been in place since 2018, when the situation normalises, the rates can return to the usual levels.’
Mr Mukunda added that business was continuing as usual, with no major changes to the prevailing circumstances, and urged the government to lead by example in controlling expenditure. He is not alone.
Dr Enock Nyorekwa Twinoburyo, a lecturer of economics at Makerere University and researcher, says the issue of superfluous expenditure should not be paid lip service or viewed through a narrow lens.
‘Debt-related allocations account for more than a third of the Shs72.4 trillion FY2025/2026 budget, while interest payments alone amount to about Shs11.3 trillion. The International Monetary Fund projects the fiscal deficit to widen to 7.1 percent of GDP in FY2025/2026 and notes that interest payments consume about a third of domestic revenue (IMF, 2026),’ the academic said.
Against this backdrop, the key question is not only how much the government spends on allowances, workshops, travel and administration, but also whether the expenditure delivers value for money and how much could be saved by eliminating wasteful spending.
‘An indicative estimate suggests that the government could save between Shs600 billion and Shs1.5 trillion annually, equivalent to roughly 0.2-0.6 percent of GDP. The estimate draws on two sources that measure different aspects of public expenditure and should not simply be added together,’ Dr Twinoburyo further observed.
Blanket cuts dangerous?
It was the Initiative for Social and Economic Rights (ISER) that put a number to what wasteful budget allocations translate to. ISER identified Shs2.27 trillion in such allocations in the FY2024/2025 budget, representing about 3.1 percent of the Shs72.1 trillion national budget. The allocations include Shs300b for special meals and drinks, Shs137b for welfare and entertainment, Shs134b for beddings, clothing and footwear, Shs114b for foreign travel and Shs36b for official ceremonies. The government recently underscored its commitment to bring in austerity measures that, for one, target official ceremonies by staging a modest ceremony at State House, Entebbe, during Uganda’s 64th Independence Day celebrations.
Dr Paddy Mugambe, a senior consultant in finance at the Uganda Management Institute (UMI), cautioned that expenditure cuts should be carefully targeted to protect the wage bill, frontline service delivery, outreach programmes and maintenance of existing public assets.
‘If these savings were redirected to priority sectors, how significantly could they reduce funding gaps in healthcare, education, roads and water? What measures would ensure the savings are actually realised and translated into improved service delivery,’ he said.
‘It is also important to recognise that not all consumptive expenditure is wasteful. Field allowances for health outreach, agricultural extension, school inspection and revenue enforcement support essential public services. By contrast, hotel-based workshops, overseas benchmarking trips and duplicated consultancies may offer greater scope for savings. A blanket 50 percent cut, as outlined in the Treasury circular, risks affecting both essential and non-essential activities alike,’ he added.
Dr Mugambe further noted that the reported Shs3 trillion quarterly reduction illustrates the scale of the potential trade-offs if such funds could be redirected to priority public services.
‘Depending on prevailing unit costs and implementation requirements, an amount of this magnitude could potentially finance nearly 920 kilometres of tarmac roads, more than 800 fully staffed Health Centre IVs, over 1,500 fully equipped model primary schools, maintenance of more than 60,000 kilometres of local government roads for a year, or facilitation for more than 150,000 university students for an entire year,’ he said.
The academic also observed that these comparisons illustrate the opportunity cost of government expenditure, although the actual outcomes would depend on project specifications, recurrent costs, procurement requirements and the capacity to implement the proposed investments.
More than meets the eye?
Yet for luminaries like Prof Suruma, austerity measures are more likely to gain public confidence if the government leads by example. He adds that raising allowance rates while asking households and other economic actors to tighten their belts sends mixed signals. Dr Twinoburyo said it is important to know that potential savings from reducing consumptive expenditure and addressing audit-identified losses could be substantial, although the figures are estimates rather than confirmed recoverable amounts.
‘The Auditor General’s FY2023/2024 report, as compiled by the Civil Society Budget Advocacy Group (CSBAG), points to losses associated with expired medicines worth Shs316.65b, unreconciled pension and gratuity supplementaries amounting to Shs382b, commitment fees on undisbursed loans estimated at Shs283b, idle equipment and non-functional projects, irregular procurement worth Shs101.8b, and overpayments,’ he said.
The potential savings from reducing consumptive expenditure and addressing audit-identified losses could be substantial, although the figures are estimates rather than confirmed recoverable amounts. Dr Twinoburyo said a 20 to 30 percent reduction in the Shs721b allocated to the five largest consumptive items identified by the ISER would yield an estimated annual savings of Shs144b to Shs216b.
‘Reducing the wider Shs2.27 trillion in potentially wasteful consumptive allocations identified by ISER by 20 to 40 per cent could save between Shs450b and Shs900b annually,’ Dr Twinoburyo said, adding that preventing or addressing 50 to 75 percent of approximately Shs1.29 trillion in audit-identified losses could yield savings of Shs650b to Shs970b.
The audit figure is based on a compilation of itemised losses reported by the CSBAG, including an adjustment for the Emyooga-Parish Development Model (PDM) double benefit. Since the categories overlap, the indicative combined annual savings range is approximately Shs600b to Shs1.5 trillion.
What to do
According to the 2024 Public Expenditure and Financial Accountability (PEFA) assessment, central government spent Shs21.516 trillion in the financial year 2020/2021, excluding debt amortisation and interest. Of this, Shs4.905 trillion, or 22.8 percent, went to goods and services, including consumptive items, medicines and other operational inputs. Employee costs accounted for Shs4.410 trillion (20.5 percent), while non-financial assets, covering development and capital spending, took Shs8.346 trillion (38.8 percent). Grants amounted to Shs3.336 trillion (15.5 percent), mainly transfers to local governments and agencies, while other expenditure, including social benefits, other expenses and tax refunds, accounted for Shs519 billion (2.4 percent).
Mr Marlon Agaba, the executive director of the Anti-Corruption Coalition Uganda (ACCU), said allowances are necessary to facilitate public servants in executing their duties, particularly during night assignments, field visits, and supervision, coordination and official engagements. He, however, expressed concern about the scale of the proposed increases, saying some allowances had doubled or nearly doubled. In his assessment, given Uganda’s debt burden and competing expenditure priorities, the increases raise serious questions at a time when austerity measures should suffice.
Dr Twinoburyo opined that high volumes of workshops, seminars and retreats create significant venue, meals and allowance costs. Some activities could be conducted virtually or held in government facilities at lower cost. He said that unplanned purchases, inflated costs and payments exceeding the value of work completed can increase public expenditure without delivering corresponding benefits. Illustrative evidence includes Shs101.8b in irregular procurement and pension overpayments.
It is estimated that annual savings of Shs0.6 trillion to Shs1.5 trillion could significantly boost funding for key sectors like health, education, and infrastructure.