Uganda moves to integrate natural capital in economic planning

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Uganda is working to integrate natural capital into its economic planning as part of a broader strategy for sustainable development—an approach that balances environmental, social, and economic priorities to promote long-term well-being for all.

Natural capital refers to the stock of natural assets such as soil, water, air, minerals, forests, and biodiversity that provide essential goods and ecosystem services. These resources support livelihoods, drive economic activity, and sustain human life, yet they have long been undervalued in traditional economic planning. By recognising their true worth, Uganda aims to align its development goals with environmental conservation.

On May 21, 2025, a three-day training workshop was launched at the Water Resources Institute in Entebbe to build the capacity of officials from various government ministries and departments in integrating natural capital into macroeconomic modelling.

The Environment for Development (EfD) Makerere Centre at Makerere University has been contracted to support this effort, with funding from GIZ. The initiative aims to enhance evidence-based policymaking, ensuring that Uganda pursues sustainable development while mitigating the impacts of climate change and environmental degradation.

Dr Peter Babyenda, the project coordinator for Natural Capital Accounting (NCA), explained that NCA involves valuing a country’s natural resources—including water, land, forests, and ecosystems—in both physical and monetary terms.

Dr Peter Babyenda, a lecturer at the School of Economics, Makerere University. (Photo by John Odyek)

“NCA estimates the stock and flow of natural capital over a specific period, examining ecosystem attributes, conditions, and services,” Dr Babyenda said. “By assigning monetary values to natural capital, we enable policymakers to incorporate the benefits of ecosystems into national planning and budgeting.”

The Ministry of Water and Environment (MWE), which is responsible for environmental conservation and climate change, is leading the project, with support from the Ministry of Finance, the National Planning Authority (NPA), the National Forestry Authority, and the Uganda Bureau of Statistics (UBOS). This collaboration is expected to enhance cross-sector policymaking and improve the quality of decision-making.

Uganda remains highly vulnerable to climate change, which continues to affect critical sectors such as water, energy, agriculture, and infrastructure. Without adequate climate action, the country could incur annual costs of between $3.2b and $5.9b.

Meanwhile, the degradation of natural resources—through deforestation, soil depletion, and declining water quality—has been exacerbated by rapid population growth and urbanisation, placing further strain on the economy.

Dr Babyenda noted that NCA can help Uganda reconcile its economic growth with environmental sustainability. “Integrating natural capital into macroeconomic models provides insights into the economic benefits of sustainable resource management,” he said. “This allows us to design policies that not only protect ecosystems but also foster economic development.”

Uganda has already developed natural capital accounts for several ecosystems and resources, working in collaboration with the Uganda Wildlife Authority (UWA), National Forestry Authority (NFA), National Planning Authority, and other institutions.

The current project seeks to build on these efforts by creating a data collection tool and running simulations to measure the economic impact of preserving resources such as clean water and biodiversity.

“We are developing an economy-wide tool that can help us estimate the effects of investments in water protection, forest recovery, and wetland recovery—how does the GDP benefit?” Dr Babyenda explained.

Dr Nick Kilimani, a research fellow at EfD, highlighted the intrinsic link between the economy and natural capital. “What happens in the economy impacts natural capital—and natural capital, in turn, affects the economy,” he said. “For a long time, we failed to account for the resources we extract from the environment. The way we manage economic growth directly influences environmental health. When we invest in protecting natural resources, we are also supporting long-term economic progress.”

Wilson Asiimwe, a consultant facilitating the training, stressed the need to consider emissions, energy, and water when evaluating natural capital. He noted that understanding forest growth rates, depletion, and restocking is vital, as these factors directly influence sustainability.

Asiimwe explained that although timber and charcoal are sourced from woodlands and shrubs, timber harvesting is typically restricted in certain areas, such as wetlands. He guided participants through training on multiplier analysis using macroeconomic modelling to demonstrate how natural capital data can inform policymaking.

EfD-Mak Centre’s role includes supporting the integration of natural capital and climate variables into macroeconomic models, compiling relevant data, and providing training for MWE staff and other government officials. The ultimate goal is to ensure that the tool becomes a permanent fixture in Uganda’s planning processes, helping the country track progress towards national development goals and supporting long-term sustainable policy.

The initiative is expected to improve inter-agency collaboration, enhance policy outcomes, and help Uganda meet its environmental and economic targets, including those outlined in the National Development Plans (NDPs) and Vision 2040.