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Ministry’s UGX2 tn deficit threatens contracts

Peter 14th Mar, 2025 Energy Pedson Mumbere
Ministry’s UGX2 tn deficit threatens contracts

A new power distribution substation in Gulu City. Ministry officials are worried that the budget deficit could affect new investments in the network. FILE PHOTO


The Ministry of Energy and Mineral Development (MEMD) is grappling with a UGX1.95 trillion budget shortfall for the Financial Year 2025/26, raising concerns over the completion of key energy projects and contractual obligations.

The financial gap, which surpasses previous shortfalls, has sparked questions about whether the ministry over budgeted compared to the previous year and how it plans to navigate the crisis.

Energy Minister Ruth Nankabirwa has warned that the funding deficit threatens Uganda’s ability to expand electricity access, complete crucial oil and gas projects, and support the mining sector.

  • “We’re not going to negotiate with finance. You bring your money and construct a transmission line using your money, and then we, the Uganda Electricity Transmission Company, will pay you through that. So we are trying to be creative to make sure that we survive,” Nankabirwa stated during an orientation retreat for new members of the Parliamentary Committee on Environment and Natural Resources at Speke Resort Munyonyo.

In the budget framework paper for the 2025/26 financial year, the Ministry had proposed a amounting to UGX2.9 trillion, a significant increase compared to previous allocations.

This rise is attributed to the escalating costs of energy infrastructure, including the Karuma Hydropower Plant (UGX7 trillion) and the expansion of Uganda’s electricity transmission network (UGX 500 billion).

  • Given the scale of these projects, the question arises whether the Ministry’s budgeting process overestimated the government’s fiscal capacity.

The Ministry attributes the shortfall to reduced government revenue collection, competing national priorities, and the high cost of infrastructure development.

During a presentation to the Parliamentary Committee on Natural Resources on January 8, 2025, State Minister for Energy and Mineral Development Opolot Okosaai and Permanent Secretary Irene Bateebe outlined the financial breakdown.

The proposed budget includes UGX16.7 billion for wages, UGX88 billion for non-wage recurrent expenses, UGX21.02 billion for Sustainable Energy Development (SED), and UGX37 billion for Sustainable Extractives Industry Development (SEID). However, critical projects such as the national electricity grid upgrade requiring over UGX500 billion face potential setbacks due to insufficient funding.

With only two months remaining in the financial year, the Ministry is looking to the government for urgent intervention.

  • Officials have proposed alternative financing mechanisms, including increased public-private partnerships (PPPs) and securing additional funding from international donors.
  • Nankabirwa urged Parliament to prioritize energy sector funding, emphasizing its role in economic growth.

Beyond the immediate financial crisis, the Ministry is also grappling with challenges such as illegal mining, power infrastructure vandalism, and the undercapitalization of the Uganda National Mining Company (UNMC), which requires UGX 200 billion.

Despite the setbacks, Uganda has made strides in the energy sector. The Karuma Hydropower Plant has added 600MW to the national grid, and electricity tariffs have dropped by 5.2%, benefiting consumers and industries. In the oil and gas sector, projects such as Tilenga (UGX 15 trillion) and Kingfisher (UGX 7 trillion) are progressing, positioning Uganda as a regional energy player.

Nankabirwa reaffirmed the government’s commitment to sustaining these achievements but acknowledged that financial constraints remain a major hurdle. She called for continued collaboration with Parliament and private sector partners to secure alternative funding sources and ensure Uganda’s energy ambitions are realized.

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