By Joy Nabulo
Uganda, like other developing countries, is one of the lowest emitting countries accounting for less than 0.1% of the global emissions (UNDP, 2020) yet very susceptible to the impacts of climate change
Development can no longer wait and the window for climate action is closing . The scale and financial costs of the necessary transformation will be substantially higher than anything that has been undertaken before in the history of the country. These costs will, in turn, only become higher the longer one waits. A critical question is: How will Uganda finance the transformative policies and measures without bankrupting themselves and without spiralling into inflationary cycles?
The problem with this is that these are exactly the structural economic traps that have constrained Uganda’s development. Instead of falling into these traps, Uganda has a series of financial mechanisms at hand that can allow its economies to prosper and drive their development
Uganda ranks as the 36th most vulnerable country to climate change and 163rd in terms of readiness, according to the Global Adaptation Index Rankings. 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
A report from UNDP emphasises 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
Uganda must clearly define the elements that shape its fiscal spending capacity, identify the real constraints on government expenditure, and develop strategic policies to gradually expand this capacity. The primary risk of running large fiscal deficits domestically is inflation, which serves as the ultimate limitation on government spending. Inflation is further intensified by two critical factors: productive capacity and resource availability.
Market and policy conditions is key where market concentration and abusive price setting behaviour by oil companies that manage to circumvent anti-trust regulations or engage in corruption to maintain their market power. Market concentration allows importers to use their economic and political influence to discourage domestic investments that could reduce their market share. Market concentration also allows exporters to use their economic and political influence to monopolize the use of critical resources i.e. importers of basic necessities like fuel tend to enjoy exclusive import licenses that are often granted via questionable if not corrupt practices.
Beyond internal factors that affect the country’s domestic productive and fiscal capacity, Uganda has to deal with burdensome external factors including crippling external debts. Several measures exist that can substantially reduce such debts and bring in additional external financing to accelerate both the energy transition and other pressing development priorities.
Financing climate action at the scale required :The Global North has vastly exceeded its carbon budget and owes the rest of the world a climate debt. However, wealthy countries are evading the rapid and deep emissions reductions required in their own countries, and increasingly shuffling responsibility onto developing countries. While 70 African and other developing countries need to plan for deep transformation to fossil free societies, they cannot be expected to finance the bulk of the efforts needed.
Uganda stands at a crossroads to either continue pursuing its development plans and relations with other parts of the world in similar ways as has been the case for the last several decades. This means repeatedly falling into the same traps with continued dependencies, indebtedness, and unfulfilled promises of well-being and prosperity as a result. Or choose to formulate another development vision that builds on the rich tradition cultures, and breaks dependencies and fosters enhanced self-reliance.
Environment Governance Institute
