Climate change puts Uganda’s trade future at risk

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OPINION

Dr Peter Babyenda

Uganda’s growing integration into regional and global markets is facing a serious threat from climate change, according to a new study examining the country’s trade performance between 1990 and 2023. The study reveals that rising temperatures and unpredictable rainfall patterns are undermining export capacity, damaging vital infrastructure, and pushing up the cost of trade.

Over the last decade, Uganda has made trade a central pillar of its economic growth strategy, with merchandise trade reaching $21.7 billion in 2023. Coffee, gold, and cocoa dominate the export basket, bringing in $8.5 billion, while imports totalled $13.2 billion.

But the country’s heavy dependence on climate-sensitive agriculture, combined with its landlocked geography, makes it highly vulnerable to environmental shocks. The study found that temperature fluctuations and erratic rainfall significantly weaken the trade balance in the long run, with agriculture, the country’s largest foreign exchange earner, most at risk.

Prolonged droughts, flash floods, and shifting weather patterns disrupt planting and harvesting schedules. They also damage critical trade infrastructure such as roads and bridges, raising business costs and cutting trade returns.

Unpredictable rains reduce farm productivity and increase post-harvest losses, while extreme heat puts crops and livestock under severe stress. These lower export volumes increase the total import bill and a deeper trade deficit.

Ironically, the study shows that increased carbon emissions, often linked to rising industrial activity, can boost trade in the short term because energy-intensive manufacturing and processing drive export growth. But these gains are fleeting. In the long run, high emissions could trigger trade penalties from global markets, particularly under measures such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), which taxes carbon-intensive imports.

There are, however, signs of hope. The research points to manufacturing value addition, improved logistics, and rising GDP per capita as key factors that can strengthen Uganda’s trade resilience. Expanding industrial capacity, especially in agro-processing, can help diversify exports, reduce reliance on raw commodity sales, and lower import dependence. These findings align with the government’s ambitious Fourth National Development Plan (NDP IV), which places “Anchor and Transformative Measures” (ATMs) at the heart of its growth agenda.

The ATMs target four priority sectors: agro-industry, tourism, mineral-based development (including oil and gas), and science, technology, and innovation. Together, these sectors are expected to fuel double-digit GDP growth, generate hundreds of thousands of jobs each year, and boost household incomes nationwide.

To fully benefit from these opportunities, Uganda must adapt its economy to a changing climate. The study calls for a shift toward sustainable industrialisation, value addition and modernisation to build resilience and safeguard trade competitiveness. Without decisive action, the climate crisis risks undoing hard-won trade gains and slowing the nation’s economic transformation.

The writer is a Research Fellow, Lecturer and Policy Engagement Coordinator at EfD-Mak Centre, School of Economics, CoBAMS, Makerere University; Email: pbabyenda@gmail.com