How can Uganda mobilise climate finance for sustainable growth?

Uganda is highly vulnerable to climate change - facing increased droughts in the northern region, floods and unpredictable rainfall that threaten the agricultural sector. The agricultural sector contributes 23.8% to the country’s GDP and sustains millions of livelihoods. According to UBOS (2023), around 68% of Uganda’s working population is employed in agriculture, and these climate disruptions can lead to crop failure, reduced productivity, and food insecurity. Uganda’s forest cover declines by 2.6% annually and is among the highest rates of global forest loss due to unsustainable land use; the situation has escalated, leading to soil degradation and increasing Uganda’s susceptibility to extreme weather events. 

The IGC partnered with the Ministry of Finance, Planning and Economic Development (MoFPED) to host Uganda’s 8^th Economic Growth Forum (EGF) and to bring together policymakers, researchers, and climate experts to address one of Uganda’s most pressing challenges: climate change. Uganda’s development is increasingly threatened by climate-related shocks, especially in the agricultural sector, a cornerstone of the country's economy. The forum highlighted the urgent need for policies that prioritise climate adaptation and mitigation to safeguard Uganda’s future economic growth.

Uganda’s climate vulnerability

Uganda ranks as the 36^th most vulnerable country to climate change and 163^rd in terms of readiness, according to the Global Adaptation Index Rankings. Rachel Sebudde, a Senior Economist with the World Bank’s Africa Poverty Reduction and Economic Management Unit at the Country Climate and Development Report (CCDR) underscored the profound impact climate change already has on Uganda’s economic growth and development.

From 2010 to 2020, approximately 30-40% of Ugandan households experienced climate shocks such as floods and droughts, resulting in an average annual loss of USD 140 million. These impacts disproportionately affect rural communities that rely heavily on agriculture, compounding poverty and food insecurity. Climate change undermines crop and livestock productivity, reduces labour efficiency due to heat stress, damages critical infrastructure like roads and bridges, and triggers significant public health challenges.

Rachel Sebudde further elaborated on how climate change adversely affects human capital, natural capital, and physical infrastructure. If left unaddressed, the effects on Uganda’s GDP will escalate, with varying degrees of damage across sectors.

Policy implications for Uganda to adapt and mitigate the climate challenge

The CCDR proposes several action areas for Uganda to adapt to and mitigate the impacts of climate change:

1. Enhance agricultural resilience: Secure land access, promote sustainable agricultural practices, and prioritise forest restoration and sustainable land management to protect rural economies.
2. Empower youth for climate resilience: Equip Uganda’s young population with the education that prepares them for climate-resilient jobs, develop social protection systems, and ensure that school facilities are robust enough to withstand climate shocks.
3. Leverage emerging trade opportunities: Invest in infrastructure, including energy, transport, and digital technologies, to capitalise on global trade shifts and green economy opportunities.
4. Accelerate urban resilience: Integrate climate adaptation into local policies and urban planning. Key measures include fostering sustainable urban mobility and developing early warning systems.
5. Strengthen climate governance: Uganda needs to bolster its institutional frameworks to ensure coordinated and effective climate action across all levels of government.

Unlocking climate finance

Tom Sengalama from UNDP emphasised the financial burden climate change imposes on Uganda, with projected losses ranging from USD 3.2 billion to USD 5 billion over the next decade if no adaptation measures are taken. To mitigate these impacts, Uganda and other African countries require significant investment in climate adaptation, especially in agriculture and industry—sectors that currently receive minimal financing.

While global climate finance reached USD 1.3 trillion, only a small fraction of these funds flow to low- and middle-income countries, with the majority allocated to energy and transport sectors. Tom Sengalama highlighted the critical need to mobilise private sector involvement in climate financing, as public sector adaptation financing currently dominates at 98%.

Tom Sengalama proposed innovative ways to enhance climate adaptation financing for Uganda:

1. Carbon financing: Monetising carbon credits to fund climate adaptation initiatives.
2. Debt-for-Nature swaps: Using debt relief mechanisms to fund conservation and climate adaptation.
3. Climate risk and insurance financing: Developing insurance schemes that cover climate-related risks for vulnerable sectors.
4. Bio-financing schemes: Creating financing options tailored to Uganda’s biodiversity.
5. Green and SDG loans: Expanding access to loans that support green infrastructure and sustainable development goals.

Integrating the climate challenge in Uganda’s policy design

The forum concluded with recommendations for Uganda’s policymakers to consider as they refine the country’s climate change strategies:

• Focus on labour and productivity: Assess the impacts of climate change on productivity, particularly in urban areas, and invest in capacity-building initiatives to strengthen workforce resilience.
• Incorporate climate change in National Development Plans: From the parish development model to district-level initiatives, climate change must be fully integrated into Uganda’s economic growth agenda.
• Financial sector engagement: Encourage small banks to incorporate climate risks into their agricultural lending decisions, ensuring that climate considerations are part of broader financial planning.
• Address aviation emissions: As the aviation sector grows, its contribution to Uganda’s carbon footprint must be addressed within the broader climate discourse.
• Invest in climate-resilient infrastructure: Uganda should prioritise infrastructure investments that can withstand climate extremes, such as heat-resistant roads and climate-proof public facilities.

Opportunities for Uganda’s sustainable growth

Uganda has many areas for growth to thrive in a climate-conscious global economy -carbon financing, regulating mineral extraction for sustainability, exploring electric vehicle adoption, and investing in climate-resilient infrastructure.

By integrating climate change into national and local development agendas, Uganda has the opportunity to turn climate challenges into avenues for sustainable growth. For policymakers, the task ahead is clear: strategic, evidence-based policy actions for safeguarding the country’s future prosperity in the face of an evolving climate crisis.