Govt collects sh2.61 trillion revenue in February

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Government revenue collections, including grants, fell short of target in February 2026, even as public expenditure remained elevated, according to the latest Performance of the Economy Report released by the Ministry of Finance.

Total revenue and grants for the month amounted to Sh2.61 trillion, against a target of Sh2.88 trillion, translating into a performance rate of 90.7% and a shortfall of Sh268.63b. The underperformance was largely driven by lower-than-expected domestic revenue collections, non-tax revenue and grants.

Domestic revenue, which forms the largest share of government income, registered a shortfall of Sh180.08b, with actual collections falling below the target of Sh2.75 trillion. The Ministry attributed this performance to weaker collections across major tax categories, particularly indirect and international trade taxes.

Indirect domestic taxes posted a shortfall of Sh15.33b against a target of Sh742.19b, mainly due to lower-than-expected receipts from Value Added Tax (VAT). The decline was most pronounced in sectors such as wholesale and retail trade, hotels and restaurants, as well as mining and quarrying. Excise duty collections also underperformed, particularly on phone talk time, soft drinks and the levy on cash withdrawals.

International trade taxes recorded a larger shortfall of Sh82.79b against a target of Sh1.05 trillion, largely on account of reduced collections from import duty and VAT on imports. This reflects subdued import activity during the month, which directly affects revenue from trade-related taxes.

However, direct domestic taxes performed above expectations, providing some support to overall revenue. Collections under this category amounted to Sh789.87b, exceeding the target by Sh14.40b. The strong performance was driven by Pay As You Earn (PAYE), corporate tax and taxes on treasury bills, indicating steady income and financial sector activity.

Non-tax revenue collections also fell significantly short of target. Government raised Sh127.96b against a planned Sh250.26b, resulting in a shortfall of Sh122.30b. The underperformance was mainly attributed to lower-than-anticipated collections from administrative fees and other government services.

Grants performed the weakest among all revenue components. Total grants received during the month amounted to Sh41.55b, far below the target of Sh130.11b, representing a performance rate of just 31.9%. The shortfall of Sh88.55b was largely due to delays in the disbursement of budget support and lower-than-expected project grant inflows.

Expenditure

On the expenditure side, total government spending amounted to Sh3.39 trillion, slightly below the planned Sh3.42 trillion. However, spending pressures remained evident in key areas, particularly interest payments and transfers to other government units.

Grants from the central government to other levels of government amounted to Sh1.11 trillion, exceeding the planned Sh978.8b. The increase was mainly driven by additional funding to Uganda Airlines, as well as the capitalisation of institutions and financing schemes.

Interest payments also surpassed projections, amounting to Sh1.03 trillion, compared to the planned Sh979.68b. The higher-than-expected interest costs were largely due to domestic borrowing, which exceeded projections by Sh75.24b, partly reflecting the front-loading of borrowing to meet government financing needs.

In contrast, expenditure on compensation of employees and purchases of goods and services registered shortfalls of Sh14.28b and Sh64.97b, respectively. This was mainly due to lower spending on allowances and employer social security contributions.

Government also spent Sh444.69b on the acquisition of non-financial assets, slightly above the planned Sh443.06b, driven by investments in infrastructure, including road rehabilitation and acquisition of equipment.