Widespread business concerns linked to the US-Israel war with Iran, delayed salary payments for government employees and shrinking foreign aid flows are likely to stifle access to credit in Uganda’s agricultural and real estate sectors as lenders grapple with harsh economic conditions and post-election uncertainty.

The ongoing Middle East conflict has sharply disrupted global shipping through the Strait of Hormuz since March, raising insurance and security costs while pushing up fuel prices in several countries.

Faced with severe logistical constraints affecting major sea routes and ports, Ugandan fuel dealers have raised pump prices, with occasional shortages of petrol, diesel and kerosene reported since April.

As a result, fuel prices in Kampala have risen to around Ush5,000 –Ush6,000 ($1.30–$1.59) per litre, while some upcountry filling stations are charging as much as Ush10,000 ($2.60).

High fuel prices typically raise the cost of living, deepen poverty and erode disposable incomes – a factor that directly affects borrowers’ ability to repay loans, economists say.

Although overall election expenditure data was unavailable by press time, Uganda’s election cycle peaked in January following presidential and parliamentary polls, while village council elections are scheduled for the 2026/27 financial year.

Credit squeezeThe closure of United States Agency for International Development (USAid) projects in developing countries at the start of last year has also triggered vacancies in commercial office and residential property, alongside significant job losses in civil society and lost procurement opportunities for local businesses, particularly hotels and restaurants.“In the quarter ending March 2026, most banks reported keeping credit standards for all sectors unchanged, with a bias towards tightening in most sectors. Specifically, banks reported net tightening in building, mortgage, construction and real estate (20.4 percent), agriculture (13.5 percent), personal and household lending (8.0 percent), and business services (3.9 percent). This was attributed to escalating geopolitical tensions in the Middle East, which have disrupted supply chains and driven up energy prices, thereby increasing business operating costs. This, coupled with increased borrower risk and repayment challenges arising from higher production costs,” said the Bank of Uganda’s (BoU) credit survey report.

The survey covered 31 regulated financial institutions, including commercial banks, credit institutions and micro deposit-taking institutions (MDIs).

But questions remain over lenders’ assessment of post-election risks, borrowers’ repayment capacity, and banking sector expectations around oil and gas opportunities ahead of commercial production.“I cannot predict that. The political swearing-in phase is done and the election season itself was peaceful. This means a return to normal business within the economy. But the real impact of the election period on the economy and people’s ability to repay loans might take some months to become clear.

Oil hopes“We have moved from tracking oil and gas commercial production from years to months. The official start of commercial oil and gas production offers banks many opportunities to grow their balance sheets by disbursing loans to businesses across the value chain. Competition among banks is changing. Instead of sitting back and waiting for big customers, banks are moving out and looking for viable projects to finance. This will eventually increase competition in the industry and help reduce lending rates over time,” said David Kalyango, BoU’s executive director for bank supervision.“An individual-based loan has a duration of three to five years, while an enterprise-based loan carries a duration of five to seven years. US dollar loans attract interest rates of 9–11 percent per year, while shilling loans are currently charged at 18–21 percent. The maximum loan value largely depends on a client’s circumstances,” said Sam Ntulume, executive director at I&M Bank Uganda.

The value of private sector credit fell from Ush28.608 trillion ($7.6 billion) in January to Ush28.585 trillion ($7.55 billion) by the end of February. Total private sector credit flows amounted to Ush29.157 trillion ($7.7 billion) by the end of March.

Business confidence rose slightly from 55.8 points in January to 59.4 in February, before easing to 58 points in March.

Slow repaymentsElection-related spending tends to create budget deficits across ministries and agencies, eventually reducing government expenditure in the wider economy and affecting some borrowers’ ability to service loans. But such spending has previously been adjusted for, including through advance expenditure on programmes such as the Parish Development Model (PDM), which begins about two years before elections.

This partly limits the economic fallout from election cycles. Still, many Ugandan banks have yet to fully exploit oil and gas opportunities because of limited professional expertise and weak balance sheets.

Looking at the real estate sector, poor returns remain a major concern.“Someone borrows money to invest in a commercial property generating an annual return of 10 percent, but the interest rate on their loan is 18 percent. This means they must look elsewhere to cover that gap. Some people have had to invest in about three commercial properties just to service one loan facility,” said a senior executive at Citibank Uganda.“Loan repayments are coming in very slowly these days and clients are telling us business is very low. But they are not telling us why business is low or how long it will remain so. We are yet to see any benefits from the oil and gas industry ahead of commercial production,” said George Kiyingi, a business development manager in Kampala.

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