Uganda first to factor climate resilience benefits into sovereign debt assessments

Uganda has become the first country to integrate the economic and fiscal benefits of climate resilience investments into sovereign debt sustainability analysis, in a move aimed at demonstrating how adaptation spending can support economic growth, strengthen public finances and improve creditworthiness.

The initiative, spearheaded by the Ministry of Finance, Planning and Economic Development (MoFPED), seeks to make the long-term returns of resilience investments visible in debt dynamics and sovereign risk assessments, thereby unlocking affordable financing for climate-vulnerable economies.

Speaking on the development, Permanent Secretary and Secretary to the Treasury (PSST), Dr. Ramathan Ggoobi, said Uganda’s approach provides a practical framework for recognising resilience investments as drivers of sustainable growth rather than merely fiscal expenditures.

“Uganda must invest in climate adaptation and resilience to safeguard its development and preserve its creditworthiness,” Dr. Ggoobi said. “These investments are essential for building long-term resilience against escalating climate, nature and terms-of-trade shocks.”

The move comes at a time when climate-related risks are increasingly being incorporated into Debt Sustainability Analyses (DSAs) and sovereign credit ratings. As countries face rising exposure to climate shocks, borrowing costs are often pushed higher, reducing fiscal space for development spending.

Uganda’s economy, particularly its agriculture and agro-industrialisation sectors, remains highly vulnerable to climate change and environmental degradation. The sectors are central to the government’s Tenfold Growth Strategy and are expected to play a key role in accelerating economic transformation.

Dr. Ggoobi noted that despite the growing importance of adaptation and resilience investments, the international financial system has yet to adequately account for their long-term benefits.

“Sovereign risk assessments, which influence investment decisions, access to finance and the cost of capital, often capture only the upfront fiscal costs of these investments without fully reflecting their long-term benefits,” he said.

According to the Ministry, this creates a paradox where countries investing in measures that reduce future risks may still face higher borrowing costs and shrinking fiscal space, making it more difficult to finance resilience-building initiatives.

The new approach aims to address this challenge by demonstrating how investments in climate adaptation can strengthen economic performance, reduce vulnerability to shocks and improve debt sustainability over time.

Dr. Ggoobi expressed hope that Uganda’s experience would inspire other countries to adopt similar methodologies and advocate for reforms in global financial systems.

“Our hope is that other countries will build on this work and join us in making the case for resilience investment,” he said. “Together, we can help ensure the relevant institutions recognise investment in resilience as not just a fiscal cost, but an investment in sustainable growth, stability and development.”

Uganda currently serves as Co-Chair of the Coalition of Finance Ministers for Climate Action and is the first nation to operationalise the approach, creating a proof of concept for how adaptation and resilience measures can be factored into sovereign risk assessments.

Economists believe the initiative could help shape future discussions on climate finance, particularly for developing countries seeking affordable capital to fund adaptation measures while maintaining sustainable debt levels.

The interim report is expected to contribute to broader reforms in international financial institutions and credit rating methodologies by highlighting the economic value of resilience investments in reducing future risks and supporting long-term development.