Uganda is poised for a significant economic boost with the anticipated start of commercial oil production, projected to elevate the country’s economic growth to 10.8% in the 2025/2026 fiscal year, beginning in July. This growth forecast represents a notable increase from the earlier projection of 6.2%.
The upcoming surge in economic growth is expected to be driven primarily by the new oil industry. The commencement of petroleum extraction is anticipated to bring considerable improvements to Uganda’s fiscal health and financial stability. The country, after nearly 20 years of delays, is finally on the brink of starting oil production and export from its western fields next year.
The discovery of oil reserves in 2006 marked a potential turning point for Uganda’s economy. However, the project has been delayed due to various issues, including disputes with oil companies over development strategies and inadequate infrastructure. These challenges have pushed back the start of production, but with these hurdles now being addressed, Uganda aims to achieve a peak production level of 240,000 barrels per day from its estimated 6.5 billion barrels of reserves.
In addition to the promising outlook for economic growth, there are concerns regarding the country’s foreign exchange reserves. Uganda’s reserves have decreased to $3.2 billion as of June, down from $3.7 billion in December 2023. This decline is largely due to high debt servicing costs, difficulties in securing affordable credit, and limited inflows of foreign currency. To mitigate these issues and support economic stability, recommendations include reducing government imports, increasing foreign exchange purchases, and improving exchange rate flexibility. These measures are seen as crucial steps to bolster Uganda’s economic resilience and capitalize on the benefits of its emerging oil industry.
