The International Monetary Fund (IMF) has warned that delaying Uganda’s oil production beyond the current financial year could impose high costs on the economy. Although the government has not provided a definite date for the start of oil production, it indicated during the last financial year that Uganda expects to begin producing its first oil in the 2026/2027 financial year, with oil revenues expected to start flowing in October.
Ernest Rubondo, Executive Director of the Petroleum Authority of Uganda, in February this year, was quoted as saying, while on a tour of the Tilenga project, that first oil would be obtained in July and first crude exports made in October. He said that all stakeholders were working towards meeting that deadline, with all essential enablers expected to be in place earlier this year.
By the end of June, however, official updates put the completion of the Tilenga project at 74 percent, though the number of wells drilled (234) was way more than the minimum target of 170 wells required for production. Works at the Kingfisher Project had reached 79 percent, with the Central Processing Facility and feeder pipelines nearing completion.
First oil must be obtained after the completion of the East African Crude Oil Pipeline (EACOP), which is to transport the crude from Hoima to Tanga for exportation. This is because there are no crude oil storage facilities in Uganda, nor a refinery for processing the crude. The project completion has been put at more than 90 percent. Before the outbreak of war in the Middle East, completion of the refinery was targeted for 2028. It is not clear how much this target has suffered because of the war.
In its latest report on Uganda’s economic performance, the International Monetary Fund (IMF) gives a scenario of a one-year delay, saying this would cost the country 3 percent economic growth. This is because the Ministry of Finance, Planning and Economic Development has already factored the revenues into the national budget, with 1.44 trillion shillings in contribution to the resource envelope. This is 1.7 percent of the total budget. The rest of the total 2.2 projected oil revenue will be channelled into the national Petroleum Fund for long-term investment as governed by the Public Finance Management Act.
If all goes as planned, economic growth will shoot up to 10.2 to 10.8 percent next year, up from 6.4 percent registered last year, with much of the additional growth rate coming from the oil and gas sector. “The outlook is set to strengthen further with the expected start of oil production in late 2026, which would strengthen fiscal and external balances over the medium term,” says a statement, but the IMF team, which also cites risks like climate change and the Middle East, was to the growth.
“Delays in oil production present a material risk to the growth outlook. For instance, a one-year delay would lower (shift) the projected growth rate in financial year 2026/2027 by about 3 percentage points,” it says. Uganda expected to have commercial oil as early as 2013, but since then the deadline has been revised multiple times due to prolonged negotiations, infrastructure design changes, tax disputes, and financing hurdles.
The Institute for Energy Economics and Financial Analysis (IEEFA) and analysts at the Mauritius Commercial Bank (MCB) Group say considering the complexities of bringing projects of this scale through their final stages of commissioning and operational readiness, production was not likely to commence until later 2026 or early 2027. Humphrey Asiimwe, CEO, Uganda Chamber of Energy and Minerals, is also a bit cautious about the early 2027/2027 target, though he believes that oil will flow before the end of this calendar year.
The IMF also expressed reservations over Uganda’s ability to manage the expected oil revenues despite a good framework being in place. The Fund generally commends the oil revenue management framework which it helped develop, but insists that its implementation requires major operational safeguards. “Any modifications in the context of the new 2026/27–2030/31 Charter for Fiscal Responsibility (CFR) should be firmly guided by the objectives of safeguarding oil revenues and ensuring their prudent and transparent use,” said the IMF staff.
They also recommend establishing clear withdrawal rules from the Petroleum Revenue Investment Reserve to further strengthen fiscal discipline and credibility; introducing regular and publicly available semi-annual reporting to Parliament on the Reserve flows; and enhancing external oversight, for instance through an independent fiscal council monitoring compliance with fiscal rules related to oil revenues.
Under the Charter, the government caps oil revenue transfers into the annual national budget at 0.8 percent of the previous year’s non-oil GDP, and the IMF strongly supports it because it protects the general economy from oil price volatility. The IMF backs the rule that all surplus oil earnings above the budget cap must be deposited directly into the PRIR (Uganda’s sovereign wealth fund) to ensure intergenerational equity.
However, despite its support for the framework, the IMF’s 2026 Article IV Consultation tasks Uganda to address several weak points. It has warned that the country still needs to establish rigid, transparent withdrawal rules for the PRIR sovereign wealth fund. Without these strict barriers, the Fund fears future governments might easily bypass the framework to extract money during fiscal crunches-URN. Give us feedback on this story through our email: kamwokyatimes@gmail.com
