IMF: Uganda’s Fuel Import System Helped Cushion Middle East War Shock

KAMPALA: Uganda’s state-led fuel import system introduced in 2024 helped cushion the economy from petroleum supply disruptions triggered by the Middle East conflict, the International Monetary Fund said, citing the shorter supply chain created by the new procurement mechanism.

In its 2026 Article IV Staff Report, the IMF said Uganda had so far experienced relatively limited spillovers from the conflict, partly because of changes in the way the landlocked East African country sources petroleum products.

“Spillovers from the ongoing war in the Middle East have been limited so far reflecting Uganda’s overall food self-sufficiency, low reliance on imported fertilizer, and the fuel import mechanism introduced in 2024 that has a short supply chain,” the IMF said.

The assessment comes two years after Uganda overhauled its fuel import system, placing the state-owned Uganda National Oil Company (UNOC) at the centre of petroleum procurement under a supply agreement with global commodities trader Vitol Bahrain E.C.

Under the system, introduced after amendments to Uganda’s petroleum supply law, Vitol supplies petroleum products to UNOC, which sells them to licensed oil marketing companies.

The government said the arrangement would shorten the supply chain, improve security of supply and reduce price volatility by eliminating some intermediaries.

The IMF did not attribute Uganda’s resilience to Vitol alone, but its assessment suggests the shorter supply chain established under the 2024 reforms has provided some protection during the latest global energy shock.

Fuel prices rise less than in some neighbours

IMF data show Uganda recorded a more moderate increase in petrol prices during the initial months of the Middle East conflict than Tanzania and Rwanda.

Using end-February 2026 prices as a baseline of 100, Uganda’s petrol price index remained close to that level through much of March before rising to around 110 by early May.

By comparison, Tanzania’s index climbed to about 138 and Rwanda’s to nearly 148, while the global index reached around 120.

Kenya remained relatively stable for much of the period before rising to roughly 110.

The figures suggest international energy disruptions eventually fed into Ugandan pump prices, but the increase was substantially smaller than in Tanzania and Rwanda over the period analysed by the IMF.

Uganda nevertheless remains a net importer of petroleum products and therefore cannot fully escape movements in international oil prices.

“As a net oil importer, the main impacts have been through rising fuel prices, some depreciation pressures on the currency, and higher yields of government bonds,” the IMF said.

Uganda imports between 2.3 billion and 2.5 billion litres of refined petroleum products annually, making fuel one of the country’s largest sources of demand for foreign currency. UNOC has said it has been handling average monthly volumes of around 240 million litres of petrol, diesel and jet fuel under the new system.

Fuel business boosts UNOC

The import arrangement has also transformed UNOC’s finances.

The Auditor General reported that UNOC posted a net profit of Shs359.7 billion in the financial year ended June 2025, compared with a loss of Shs3.8 billion the previous year, making it the most profitable of the public corporations reviewed.

Government figures have separately indicated that more than 3.3 billion litres have been imported under the state-led system since July 2024, generating about $150 million in margins for UNOC.

The government has also linked centralised fuel procurement to reduced speculative pressure in the foreign exchange market.

In its 2026/27 budget, the finance ministry said direct imports through UNOC had “strengthened supply stability and reduced speculative pressures in the foreign exchange market.”

Uganda’s foreign exchange reserves rose to about $6 billion in the 12 months to March 2026, from $3.6 billion a year earlier, supported more broadly by export earnings, tourism, foreign investment, portfolio flows and remittances.

The IMF, however, warned that Uganda’s resilience could be tested if the Middle East conflict persists or intensifies.

Higher energy prices, transport costs and exchange-rate pressures are expected to push headline inflation above 5% during the 2026/27 financial year.

Vitol relationship expands

The IMF assessment comes as Uganda deepens its relationship with Vitol beyond fuel procurement.

UNOC recently signed agreements for a $2 billion (about Shs7.6 trillion), seven-year financing facility from Vitol Bahrain to develop strategic petroleum and infrastructure projects.

The financing is intended to support projects including a new petroleum storage facility at Namwabula in Mpigi, expansion of the Jinja petroleum terminal, extension of a refined products pipeline from Kenya, refinery-related developments and other national and regional logistics infrastructure.

Uganda is also seeking to diversify its petroleum logistics routes through Kenya and Tanzania, while investing in storage and pipeline infrastructure to reduce the vulnerabilities associated with being a landlocked fuel importer.

The country’s dependence on imported petroleum products could change significantly once commercial crude production begins and planned domestic refining capacity is developed.

Uganda has an estimated 6.5 billion barrels of crude resources, of which about 1.4 billion barrels are considered recoverable.

The IMF expects oil production to accelerate economic growth and eventually strengthen Uganda’s fiscal and external accounts.