Uganda's economic outlook: Debt, climate resilience & oil prospects

Uganda's economic landscape is displaying resilience amidst global uncertainties, driven by strategic investments in oil infrastructure, debt management, and climate adaptation. As the nation gears up for oil production in 2025, key questions emerge concerning its debt sustainability, capacity to withstand climate shocks, and the broader economic ramifications of its burgeoning oil sector. David Kamugisha, the Head of Trading and Global Markets at Stanbic Bank Uganda, shed light on these pressing issues in an exclusive interview with CNBC Africa. In discussing debt management, Kamugisha highlighted Uganda's endeavor to bolster its debt sustainability through various measures. Despite the debt-to-GDP ratio rising to 52 percent from 48 percent two years ago, the government aims to curtail borrowing reliance on external sources by beefing up domestic revenue mobilization. This strategy encompasses augmenting traditional tax revenues, trade and license fees to mitigate debt accumulation. Moreover, a focus on productive sectors within the economy aims to stimulate growth and enhance revenue generation, thereby mitigating debt escalation risks. The incorporation of clear short and long-term strategies, including government agency consolidation, aims to steer the country towards sustained debt management. Kamugisha emphasized the pivotal role of sectoral contributions in this endeavor. Shifting the conversation to the oil sector, Kamugisha highlighted robust developments within Uganda's oil and gas industry. Public investments in a trade industrial park and ongoing pipeline projects indicate significant strides in this domain. Kamugisha underscored the industrial park's potential to serve as a hub for various sectors, including agriculture, trade, and services, aligning with the country's oil goals. The discussion on export diversification pivoted towards Uganda's agricultural strength, namely coffee, tea, and cocoa. While these commodities have historically underpinned export growth, recent developments have thrust gold into the spotlight as Uganda's primary export. The emergence of additional mining ventures alongside the country's oil prospects signals a growing diversification trajectory that augurs well for economic resilience. With plans to propel GDP growth into double digits in the medium term, Uganda beckons investors to capitalise on the conducive investment climate marked by affordable funding costs and promising returns. Kamugisha highlighted the burgeoning opportunities in mining, rare earth materials, and climate-friendly investments such as carbon credit footprint initiatives, aligning with global sustainability imperatives. Delving into the role of the private sector, Kamugisha delineated its substantial contribution to Uganda's economic progress. While the formal private sector drives industry growth, challenges ensue from market access constraints compounded by escalating trade costs. Acknowledging the pivotal role of banks in supporting private sector initiatives, Kamugisha advocated for enhanced financing mechanisms to bolster sustainable growth pathways. Encouraging symbiosis between the formal and informal private sectors, he underscored the importance of nurturing a conducive ecosystem to foster long-term sustainability and economic expansion.