The Ministry of Finance has identified the clearance of existing domestic arrears and the prevention of new ones as a top strategic priority in the 2026/27–2029/30 national budget cycle, warning that failure to address the problem could undermine Uganda’s long-term economic growth ambitions.
The commitment is outlined in the National Budget Framework Paper (NBFP) for FY 2026/27 to FY 2030/31, which was tabled before Parliament on December 16, 2025, by the Minister of State for Finance (General Duties), Henry Musasizi.
The NBFP sets out Government’s medium-term fiscal and policy direction, anchored on accelerating socio-economic transformation and building a self-sustaining economy.
According to the document, Government has adopted a three-year strategy beginning in FY 2025/26 to eliminate the existing stock of domestic arrears while tightening controls to prevent the accumulation of new obligations.
“Another critical priority is the need to clear the current stock and stop the creation of new domestic arrears,” Musasizi said. “A strategy was put in place to eliminate the current stock of domestic arrears in three financial years starting in FY 2025/26. This is intended to stimulate private sector performance, drive economic growth and create gainful jobs, especially for suppliers of goods and services and contractors.”
As part of the strategy, Government significantly increased funding for domestic arrears in the current financial year, allocating UGX1.4 trillion in FY 2025/26, up from UGX200 billion in FY 2024/25. The Ministry said additional resources will be availed as fiscal space improves.
Beyond financing, the Ministry outlined stricter administrative measures to prevent the build-up of new arrears. These include stronger enforcement of the commitment control system, sanctions against accounting officers responsible for creating new arrears, and the provision and ring-fencing of adequate counterpart funding for multi-year projects.
The renewed focus comes against a backdrop of persistently high arrears across Government. The Report on Public Debt, Grants, Guarantees and Other Financial Liabilities for FY 2024/25, published in November 2025, shows that audited consolidated domestic arrears for both Central and Local Governments stood at UGX5.748 trillion as of the end of June 2024, based on the Auditor General’s findings.
The Ministry acknowledged the continued growth in arrears, noting that the trend necessitated the adoption of a structured elimination plan over the next three fiscal years starting FY 2025/26.
Under the strategy, priority payments will be made to domestic suppliers of essential goods and services such as food supplies for security agencies and medicines, as well as statutory obligations including wages, pensions and gratuity.
Contractors in the works, transport, energy and water sectors will also be prioritised, alongside classified expenditures, utilities, taxes and statutory deductions, and compensation liabilities under the Uganda Land Commission, the Ministry of Lands, Housing and Urban Development, and the Ministry of Justice and Constitutional Affairs.
A breakdown of arrears shows that public institutions have accumulated utilities arrears amounting to UGX237.70 billion, with Central Government accounting for UGX237.13 billion and Local Governments UGX570 million. Outstanding rent arrears stand at UGX40.57 billion, while unpaid employee costs total UGX90.60 billion, UGX72.05 billion owed by Central Government and UGX18.54 billion by Local Governments.
The debt report also reveals arrears of UGX166.5 billion arising from unpaid contributions to international organisations, with Central Government responsible for UGX166.48 billion and Local Governments UGX80 million.
Court awards and compensation claims constitute one of the largest arrears categories, with Central Government owing UGX1.172 trillion and Local Governments UGX1.57 billion, bringing the total to UGX1.173 trillion.
Unpaid goods and services consumed by public institutions amount to UGX1.080 trillion, including UGX1.052 trillion owed by Central Government and UGX28.77 billion by Local Governments. Land compensation arrears stand at UGX1.193 trillion, with Central Government owing Project Affected Persons over UGX1.190 trillion and Local Governments UGX3.51 billion.
Outstanding pensions and gratuity arrears total UGX246.64 billion, of which Central Government owes UGX233.13 billion and Local Governments UGX13.51 billion. In addition, uncategorised domestic arrears amount to UGX902.54 billion, with Central Government accounting for UGX892.36 billion and Local Governments UGX10.18 billion.
The Ministry further reported UGX615.45 billion in unremitted taxes and other statutory deductions by Ministries, Departments and Agencies and Local Governments, with Central Government responsible for UGX612.82 billion and Local Governments UGX2.63 billion.
The Finance Ministry said the medium-term budget strategy is guided by Government’s ambition to expand the size of Uganda’s economy tenfold by 2040, starting with a plan to double Gross Domestic Product every five years.
Under current projections, Uganda’s GDP is expected to grow from about US$69 billion to US$500 billion by 2040, a target officials say will remain unattainable without restoring fiscal discipline and clearing long-standing domestic arrears.
