[ACCI-CAVIE] The commencement of commercial crude oil production in Uganda is projected to drive the country’s economic growth into double digits in the upcoming financial year, according to a report from the International Monetary Fund (IMF).

The IMF forecasts that Uganda’s economy will experience a remarkable growth rate of 10.8% in the 2025/2026 fiscal year, which begins in July. This marks a significant increase from a previous projection of 6.2% for the prior period. The report emphasizes that the initiation of oil production will contribute to a lasting improvement in both the fiscal and current account balances.

After nearly two decades of delays, Uganda is finally set to begin the production and export of crude oil next year from fields located in its western region. Commercial reserves were first discovered in 2006; however, various factors—including disputes with oil companies over development strategies and inadequate infrastructure—have hindered progress in the sector.

At peak production, Uganda is expected to pump 240,000 barrels of oil per day from its estimated reserves of 6.5 billion barrels. The IMF report highlights that this development could significantly bolster the country’s economic outlook.

However, the IMF also noted that Uganda’s foreign exchange (FX) reserves have been on the decline, prompting a call for intervention from the central bank. Recommended measures include reducing government imports, increasing FX purchases, and allowing greater exchange rate flexibility. Uganda’s FX reserves decreased to $3.2 billion in June, down from $3.7 billion in December 2023. This decline has been attributed to the high costs associated with debt servicing, challenges in securing affordable credit, and limited hard currency acquisitions.

As Uganda prepares to enter the oil production arena, the anticipated economic benefits are expected to bolster the nation’s financial stability and growth, paving the way for a bright economic future.

The editorial team with Reuters