Uganda to Issue New Oil and Gas Licenses and Grow at Over 10% Next Year

Uganda plans to issue new oil and gas exploration licenses in the 2025/2026 fiscal year as part of efforts to stimulate investment and accelerate economic growth, Finance Minister Matia Kasaija announced on Wednesday. The move comes as the East African nation prepares to start commercial oil production next year.

Uganda’s last licensing round, launched in 2019, concluded in early 2023, awarding the final two of five exploration blocks in the Albertine Graben region, where an estimated 6.5 billion barrels of oil have been discovered. With only 40% of the basin explored so far, the government sees further potential for significant growth in production volumes.

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“Accelerating investments in oil and gas will be instrumental in contributing to faster growth in Uganda next financial year,” Kasaija said. He emphasized that the issuance of additional exploration licenses would drive greater output and attract new investment.

The Albertine Graben basin, located in Uganda’s west, is the country’s primary oil-producing region. TotalEnergies, the French multinational, holds a 56.7% stake in the fields, alongside partners China National Offshore Oil Corporation (CNOOC) and Uganda’s state-run Uganda National Oil Company (UNOC).

Economic Growth Projections

Uganda’s long-awaited entry into the oil market is set to transform its economy. According to the International Monetary Fund (IMF), the start of commercial crude oil production in the 2025/2026 fiscal year is expected to propel Uganda’s economic growth to 10.8%, a significant increase from the projected 6.2% for the previous period.

“Growth is expected to strengthen, boosted by the start of oil production, which will make a lasting improvement to the fiscal and current account balances,” the IMF report noted.

At full capacity, Uganda is expected to pump around 240,000 barrels of oil per day, a figure that could substantially bolster the country’s revenues and improve its fiscal standing. However, the road to production has been long, with commercial reserves first discovered in 2006, and progress delayed by disputes over development strategies and the need for infrastructure investment.

Debt and Financial Concerns

Despite the optimistic growth outlook, Uganda’s financial challenges persist. Kasaija addressed concerns over the country’s debt load, asserting that it remains “sustainable” despite recent credit downgrades by international ratings agencies. Uganda is committed to keeping its debt-to-GDP ratio below 50%, he said.

In August, Fitch downgraded Uganda’s rating from B+ to B, citing the country’s “reduced access to concessional financing, high domestic borrowing costs, and declining foreign-exchange reserves.” This followed a similar downgrade by Moody’s in May, which highlighted Uganda’s “diminished debt affordability.”

The IMF has also expressed concern about the country’s foreign exchange reserves, which dropped to $3.2 billion in June, down from $3.7 billion in December 2023. The decline was attributed to rising debt service costs and Uganda’s difficulty in securing low-cost credit. The IMF recommended that Uganda’s central bank intervene by reducing government imports, increasing foreign exchange purchases, and allowing greater exchange rate flexibility to stabilize reserves.

Future Prospects

As Uganda prepares for its next phase of oil production, the government’s strategy of issuing new exploration licenses aims to attract further investment and cement the country’s position in the global energy market. The oil sector, coupled with prudent economic management, is expected to drive Uganda’s economic growth and improve its fiscal outlook.