Budget Gives Relief to Workers but Raises Cost of Living

By Saha

KAMPALA — Uganda's Shs84.39 trillion national budget for the 2026/27 financial year promises support for workers, farmers and small businesses, but new taxes on fuel and everyday commodities are expected to increase the cost of living for many households.

Finance Minister Matia Kasaija unveiled the budget with a focus on economic growth, infrastructure development, agriculture and domestic revenue mobilisation.

Among the key benefits announced is an increase in the Pay As You Earn (PAYE) tax-free threshold from Shs235,000 to Shs335,000 per month. The change means low-income earners will take home more money from their salaries.

The government has also allocated Shs568.6 billion for teacher salary enhancements and Shs371.7 billion for agricultural credit facilities aimed at helping farmers access affordable loans for production and expansion.

Small businesses also received a boost after the VAT registration threshold was raised from Shs150 million to Shs300 million annual turnover, reducing compliance costs for thousands of enterprises.

However, the budget introduces several tax measures that are likely to be felt directly by consumers.

Excise duty on petrol and diesel has increased by Shs200 per litre, a move expected to raise transport costs across the country. Economists warn that higher fuel prices could trigger increases in taxi fares, boda boda charges and the cost of transporting goods to markets.

Taxes on sugar and cooking oil have also doubled. Excise duty on sugar increased from Shs100 to Shs200 per kilogram, while cooking oil duty rose from Shs200 to Shs400 per litre. These changes could affect the prices of common household items and food products.

The construction sector is also expected to feel the impact of higher taxes after excise duty on cement increased from Shs500 to Shs750 per 50-kilogram bag. In addition, an environmental levy on imported second-hand clothes, commonly known as mivumba, has been doubled from 15 percent to 30 percent.

Alcohol consumers will also pay more following an increase in excise duty from Shs1,700 to Shs3,500 per litre.

While government argues that the new taxes are necessary to raise domestic revenue and finance development programmes, some analysts say the measures could put additional pressure on household budgets already facing rising living costs.

For many Ugandans, the new budget presents a mixed picture: more support for education, agriculture and low-income workers on one hand, and higher prices for transport, food, clothing and construction materials on the other.

As the new financial year begins on July 1, citizens will be watching closely to see whether the benefits of increased government spending outweigh the burden of higher taxes.