Uganda: Fiscal Space Analysis

Fiscal space for social expenditures has remained tight in Uganda, in particular given the prioritizing of infrastructure spending. Due to the scaling up in infrastructure investment, which has been ongoing in recent years, the balance in spending between social sectors on the one hand and economic and productive sectors on the other has shifted significantly towards the latter. This shift has thus far not generated higher growth of gross domestic product (GDP), which slowed to 3.8 per cent in financial year (FY) 2016/17. The combination of low growth and inefficient tax administration has in turn limited the revenue base. Facing a tight revenue envelope, and with rising development spending, the government has had to tighten recurrent expenditure and increase borrowing to finance infrastructure. Taken together, these actions have led to a progressive increase in the debt/GDP ratio, placing social spending under pressure, and putting social indicators, such as primary completion rates, at risk.