The Bank of Uganda Governor, Mr Emmaniuel Mutebile plans to withdraw more financing from the Petroleum Fund than it did in the past two fiscal years combined, even as the country is yet to pump a drop of oil.
The Finance Ministry is expected to draw down 445 billion shillings ($120.6 million) in the fiscal year to end-June, according to the Bank of Uganda’s annual report. While it is yet to begin commercial oil production, Uganda has already taken out 325.3 billion shillings from the fund.
The central bank will transfer the money from the Petroleum Fund to the Consolidated Fund quarterly for investment, according to the report.
Uganda created the fund in 2015 by the Public Finance Management Act (PFMA), 2015 and is overseen by the Bank of Uganda is to receive revenue-deposits from oil-related activities including output, as well as pre-production transactions.
It had grown to Shs422.9b as at December 31, 2017, mainly from payment of Capital Gains Taxes (CGT) by Anglo-Irish Tullow Oil.
The Fund operates on three accounts; a dollar and shillings accounts, respectively, managed at Bank of Uganda, and a third account in New York to facilitate investment of revenue.
According to the semi-annual report for the period ended December 31, 2018, presented to Parliament, the Shs288b is constituted by $74m on the dollar account, and Shs11b on the shillings
The Fund has two objectives: financing the Budget and saving/investment for the future generations.
The start of commercial oil production in Uganda, according to World Bank in its economic memorandum issued on June 23 last year, offers long-term prospects to diversify the economy and catapult it to upper middle income status by 2040.
With commercial oil production at peak, the Bank estimates show that Uganda could earn up to $3b (about Shs7 trillion) in revenues from exports of up to 60,000 barrels of oil per day.
These revenues have the potential to propel the economy by between 7 and 10 per cent forecast up from the current stagnation of 5 per cent. However, like countless other actors have chorused before, the World Bank says this is only possible if revenues do not just end up in people’s bank accounts but rather if channelled to development of human capital — education, institution building, good governance and transparency, properly managed through an efficient and transparent strategy, and if an effective sharing formula is ensured for revenues to trickle down to local government entities.