Overview:
Bank of Uganda warns that another delay to "first oil" could severely disrupt the economy, raising inflation, weakening the shilling, and slowing GDP growth in the 2027/2028 financial year.
KAMPALA, Uganda — The Bank of Uganda has flagged the ongoing delay of commercial oil production as a major risk to the country’s economic outlook, warning that another push to 2027 or 2028 would dampen investment, weaken the shilling and intensify inflationary pressures.
The central bank’s November Monetary Policy Report emphasizes that the start of commercial oil production is embedded in its medium-term growth projections, which average about 8%.
The “first oil” date has repeatedly shifted over the last decade due to financing hurdles, infrastructure bottlenecks and sequencing delays. The government last revised the expected start from late 2025 to the fourth quarter of 2026, with the possibility of sliding into 2027.
Economic Impact of Further Delays
The central bank warns that if the date slips further into the 2027–2028 financial year, the macro script will change significantly:
- Growth Slowdown: Real gross domestic product growth is projected to fall by 0.1 percentage points in the 2026–2027 financial year and 0.3 percentage points in the 2027–2028 financial year.
- Inflation Spike: Headline inflation is projected to rise by 0.5 percentage points in the 2026–2027 financial year and 0.9 percentage points in the 2027–2028 financial year. Core inflation would also increase, driven by the rising cost of imported goods and services.
- Currency Pressure: The deferral of anticipated foreign exchange inflows would “create depreciation pressures on the exchange rate,” increasing the cost of imports and imported inputs, the central bank said.
- Balance of Payments: The delay pushes back the critical moment when the Bank of Uganda expects oil exports and reduced oil-project imports to narrow the current-account deficit and move the overall balance of payments toward a consistent surplus, projected around the 2027–2028 financial year.
The Bank of Uganda concluded that a delay would force it to “maintain a tighter monetary stance for longer to anchor expectations.”
Refinery bottleneck cited
Energy State Minister Okasi Opolot conceded that there have been delays in key projects, particularly the $4 billion refinery, which is expected to process 60,000 barrels of crude oil per day and is a major component of the commercial production start.
Opolot noted that the refinery’s delay will impact the country’s ability to maximize economic benefits, forcing Uganda to continue the “costly paradox” of exporting crude oil while importing refined fuel. He added that the postponement will also defer the creation of thousands of jobs and Uganda’s ambition of becoming a regional petroleum supplier.
Despite these setbacks, Opolot affirmed that key upstream projects such as the Tilenga and Kingfisher fields are making good progress, with drilling and associated development activities at 60% and 74%, respectively, as part of a broader $4 billion investment wave aimed at preparing the sector for full production.