UGANDA BUDGET 2026/27: Inside the Priorities, Tax Reforms That Will Shape Future of Uganda’s ICT Sector
By Amos Tayebwa
When new Finance Minister Henry Musasizi unveiled Uganda’s Shs84.4 trillion national budget for the 2026/27 financial year last month, digital transformation featured prominently alongside commercial agriculture, industrialisation and market access as one of government’s key strategies for achieving full monetisation of the economy.
For Uganda’s ICT industry, the budget sends mixed signals.
On one hand, government has committed Shs1.14 trillion to Science, Technology and Innovation (STI), ICT and the creative industries—the largest commitment yet to innovation, digital infrastructure and research.
On the other hand, industry experts argue the allocation remains disproportionately small considering ICT is expected to become the backbone of Uganda’s ambitious plan to expand the economy tenfold by 2040.
The consensus emerging from policy analysts, fintech leaders, tax experts and government officials RedPepper listened to is clear: the budget contains encouraging policy signals, but its success will ultimately depend on implementation, private sector participation and whether investment matches the country’s digital ambitions.
ICT Positioned as Growth Catalyst
Government’s priorities under the allocation include commercialising locally developed innovations such as Kiira Motors vehicles, Dei BioPharma pharmaceuticals, value-added agricultural products, establishment of a national Hi-Tech City, expansion of digital infrastructure, increased investment in research and innovation, growth of Business Process Outsourcing (BPO), digitisation of government services and expansion of e-commerce.
For Financial Technologies Service Providers Association (FITSPA), representing over 210 fintech companies, the budget demonstrates that digital transformation is no longer an aspiration but a central pillar of Uganda’s economic strategy.
According to FITSPA, expanding internet infrastructure, strengthening intellectual property protection and supporting innovation ecosystems will create fertile ground for digital financial services, online commerce and technology startups.
The association also points to Uganda’s rapidly expanding digital financial ecosystem.
Mobile money transactions reached Shs392.7 trillion over the past year, supported by 36.7 million active accounts and more than 1.22 million mobile money agents, highlighting fintech’s growing contribution to financial inclusion.
Digital Economy Expected to Drive Economic Transformation
Startup Uganda believes the budget signals government’s increasing recognition that innovation is becoming a strategic economic asset rather than merely a technology issue.
The organisation says allocations towards innovation commercialisation, digital infrastructure, intellectual property protection and establishment of a Hi-Tech City present significant opportunities for startups.
It notes that increasing the VAT registration threshold from Shs150 million to Shs300 million, together with higher PAYE thresholds, will provide some relief for growing businesses.
However, Startup Uganda cautions that increased fuel taxes and other levies could simultaneously raise operating costs, particularly for logistics-dependent technology businesses and e-commerce companies.
Perhaps more importantly, Startup Uganda observes that most government financing programmes favour formally registered enterprises, meaning startups operating informally risk missing emerging funding opportunities.
The organisation says implementation—not announcements—will determine whether these opportunities materialise.
“As Startup Uganda, we believe it is our responsibility not only to celebrate announcements, but also to track implementation, communicate opportunities as they become available, and help our members navigate the evolving policy landscape,” concludes Angel Kabera, Communications Lead, Startup Uganda Secretariat.
Budget Reflects Gov’t Priorities
Jonathan Kayemba, Chief Executive Officer of Logos Cloud Edge Limited and Chairperson of the CIO-CXO Leadership Forum, says many Ugandans mistakenly view the national budget as a government document with little relevance to private businesses.
“The national budget is not a remote technical document that should concern government alone. It is a statement of priorities which affect digital infrastructure, public services, skills, cybersecurity, AI, innovation, taxation, regulation and private sector investment,” he said.
Kayemba argues that every institution pursuing digital transformation is affected whenever government changes spending priorities.
“When investments are delayed or accelerated, regulations are shaped and implementation choices are made, these consequences are felt by every institution trying to digitise, every business trying to grow, every innovator trying to build and every citizen depending on reliable services.”
He challenged ICT leaders to become active participants in shaping policy instead of remaining spectators.
“The figures should not simply be treated as headlines. They should provoke serious conversation. What outcomes are we expecting? How will value be measured? What should be prioritised so every shilling creates real digital public value?”
Private Sector Sees Huge Opportunities
Private Sector Foundation Uganda (PSFU) believes digital transformation is becoming the enabling platform for nearly every productive sector of the economy.
Dr Julius Byaruhanga, PSFU’s Director of Policy, Research and Advocacy, says ICT should not be viewed as an isolated sector but rather as the foundation supporting agriculture, manufacturing, tourism, mining and financial services.
“Digitalisation is not a standalone sector. It is largely an enabler of competitiveness and productivity across the entire economy,” he said.
According to Dr Byaruhanga, opportunities now exist for ICT firms developing precision agriculture tools, digital marketplaces, logistics platforms, fintech solutions, manufacturing automation, tourism applications and export technologies.
He says startups should align their innovations with sectors where government is already investing heavily.
“If you innovate in isolation, you will miss the connection. Investors should work with industries, understand their challenges and provide technology solutions.”
He also encouraged ICT companies to pursue partnerships with Uganda Development Bank, government agencies and universities to commercialise locally developed technologies.
NITA-U Highlights Digital Infrastructure
From government’s perspective, the budget will prioritise expanding digital infrastructure, integrating government services and improving citizen access to online services.
Gloria Atwine Katuuku, Director of Planning, Research and Development at NITA-U, says approximately Shs513.86 billion under the Digital Transformation Programme will finance infrastructure expansion, digital government services, last-mile connectivity and digital skills development.
She says NITA-U is implementing Uganda’s Digital Acceleration Programme to extend fibre connectivity, establish public Wi-Fi hotspots in markets and strengthen integration of government platforms.
“We are moving beyond building platforms to integrating government services so that citizens can access services seamlessly,” she explained.
Katuuku added that government is also collaborating with education institutions to strengthen digital skills while encouraging private innovators to develop solutions that address public sector challenges.
“We are looking at collaboration with innovators and startups to develop solutions that government can adopt.”
Experts Question Size of Allocation
Despite welcoming government’s priorities, financial analysts question whether the funding matches Uganda’s economic ambitions.
John Wavamuno, Manager Corporate Finance at BDO Uganda, says ICT is expected to contribute US$136 billion towards Uganda’s targeted US$500 billion economy by 2040, yet receives only about 1.35 percent of the 2026/2027 national budget.
“It is difficult to call ICT the catalyst of economic transformation while allocating only 1.35 percent of the national budget to it,” he observed.
He argues that achieving double-digit economic growth requires deliberate investment in digital infrastructure.
“We cannot name ICT as the catalyst and then fund it minimally. There is more we can do.”
Wavamuno believes Uganda should study countries such as Singapore, South Korea, China and Vietnam, where digital infrastructure, predictable policy and performance-based investment accelerated economic transformation.
He recommends ring-fencing ICT funding, expanding public-private partnerships, strengthening digital infrastructure and linking future ICT funding to measurable performance.
Tax Changes Present Mixed Picture
The budget also introduces several tax changes with implications for ICT businesses.
John Jet Tusabe, Director of Tax and Regulatory Services at BDO Uganda, says the increase in the VAT registration threshold to Shs300 million will reduce compliance costs for many small technology firms.
Similarly, increasing the PAYE tax-free threshold from Shs235,000 to Shs335,000 provides modest relief for employees.
However, Tusabe warns that new tax measures could significantly increase operating costs.
Software acquired from foreign suppliers will now attract 15 percent withholding tax after being legally classified as royalties, increasing procurement costs for many ICT businesses.
Foreign borrowing will also become more expensive following introduction of a 5 percent withholding tax on interest paid to foreign financial institutions.
Meanwhile, higher fuel excise duty is expected to increase transport and logistics costs across the digital economy.
Tusabe also notes that startups established after July 2025 remain eligible for a three-year income tax holiday, while larger ICT investors can access ten-year tax holidays under existing investment incentives.
Digital Transformation Requires More Than Budget Allocations
Across the ICT ecosystem, experts agree that the 2026/27 budget sends encouraging policy signals.
Government has demonstrated commitment to innovation, digital infrastructure, research, e-government and technology-driven economic transformation.
However, stakeholders caution that funding alone will not determine success.
Implementation speed, stronger collaboration between government and industry, affordable internet, predictable tax policy, private investment and sustained infrastructure development will determine whether Uganda’s digital ambitions translate into economic growth.
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