The Ugandan Ministry of Finance, Planning, and Economic Development issued a warning on Thursday regarding significant risk factors affecting the country’s revenue collection in the upcoming financial year 2024/2025.
In its Fiscal Risk Statement, the ministry highlighted ongoing geopolitical tensions, tightening global financial conditions, and the impact of climate change as key concerns.
Geopolitical tensions, including conflicts in the Middle East and the Russia-Ukraine crisis, pose threats to global supply chains and commodity prices, potentially disrupting Uganda’s economy.
Additionally, conflicts in neighboring South Sudan and the eastern Democratic Republic of the Congo could disrupt regional trade and increase security spending, posing fiscal risks to Uganda’s national budget.
As advanced economies implement tighter monetary policies to address inflation, capital flight may affect foreign exchange inflows to Uganda, leading to pressure on the Ugandan shilling and impacting living costs, production, and debt servicing.
Moreover, tighter global financial conditions are increasing the cost of external borrowing for Uganda, coupled with reduced access to concessional financing, creating significant financing constraints for the government budget.
Climate change-related natural disasters, which have become more frequent in the past two decades, are causing annual economic losses estimated at 87 million U.S. dollars. These losses are expected to rise with ongoing climate change, putting pressure on national budgets due to the need for relief, recovery, and reconstruction efforts.
In response to these risk factors, the ministry emphasized the importance of a vigilant and adaptive fiscal policy. This approach aims to address immediate fiscal pressures while strategically preparing for future uncertainties, ensuring the country’s resilience in the face of evolving challenges.
