Uganda budget cuts, low spend ruin hospitality sector

Sunday May 19 2024

Exhibitors promoting Ugandan products during 16th African Fine Coffee Conference at Serena Hotel Kampala, Uganda in February 2018. PHOTO | FILE | NMG


Budget cuts in the public and private sector since last year alongside weak consumer spending are hurting businesses in Uganda’s fast-moving consumer goods and hospitality industries.

The trend points to lower product sales and fewer clients visiting food joints in the first half of 2024.

Multiple spending cuts inflicted on various government ministries and agencies are blamed on reduced tax revenues, higher debt servicing costs and contingent expenses tied to entities such as National Identification Registration Authority and previous preparations made for the Non-Aligned Movement and G77+China summits held in Kampala, which cost Ush240 billion ($63 million) in overall organisational expenses.

Read: Uganda struggles to raise money for budget

A Ush1.3 trillion ($342 million) Supplementary Budget was tabled in Parliament in March for fresh contingency funding needs identified by government. The supplementary package was mobilised through additional budget cuts executed in different sectors, Finance Ministry officials indicated.

In comparison, the scale of budget cuts implemented in the private sector is unclear despite funding jitters felt by donor-supported institutions.


Whereas distributors of fast-moving consumer goods recorded lower product sales in the first quarter of 2024 compared to the same period last year, restaurants have witnessed shrinking sales.

“We used to enjoy peak sales on Thursday through Sunday before the lockdown period. But things have changed since then. Our peak sales days have reduced to Friday and Saturday. Sunday sales volumes are average, akin to Mondays,” an operations supervisor at Chicken Tonight Ltd said.

The total value of loan applications received by commercial banks fell from Ush5.5 trillion ($1.5 billion) in October 2023 to Ush5.4 trillion ($1.42 billion) in January 2024 according to latest Bank of Uganda (BoU) data.

The total value of loan applications approved by commercial banks dropped from Ush3.2 trillion ($842 million) to Ush3.1 trillion ($815.7 million) during the same period under review.

Read: Uganda parliament approves loans totalling $1.38bn

Private sector credit growth registered by the transport and communications sector rose from 2.5 percent in October 2023 to five percent in January 2024. Growth registered by the business services sector was by 2.5 percent in October 2023 but shrunk to negative one percent in January 2024, BoU data shows.

Credit growth recorded by the personal loans segment reduced from 17 percent in October 2023 to 14 percent in January 2024.