Uganda to establish special fund
Feb 06, 2011
UGANDA intends to create a special fund, where oil revenue will be separately deposited in a bid to avert economic instability arising from the discovery of oil reserves and natural resources.
By Ibrahim Kasita
UGANDA intends to create a special fund, where oil revenue will be separately deposited in a bid to avert economic instability arising from the discovery of oil reserves and natural resources.
Lawrence Kiiza, the economic affairs director in the finance ministry, said the fund would ensure transparent collection and utilisation of the oil revenue to ensure development. “The special fund will be in the central bank, but will be separate from the foreign reserves,†he said.
“This will ensure value for our money by investing in education, health, energy and roads through the budget process.†Kiiza was speaking at the East African Petroleum Conference and Exhibition (EAPCE’11) at Serena Hotel, in Kampala last week.
Uganda is hosting the conference for the second time. It is held on a rotational basis among the member states every two years.
The conference focused on the potential and investment opportunities in the oil and gas sector in East Africa.
“Harnessing East Africa’s Oil and Gas Potential and Utilising the Resources to Create Lasting Values†is this year’s theme. Kiiza said withdrawals from the fund would be controlled by clear rules supported by the law to be passed by Parliament.
“We must plan and save part of the oil money for the future generation, and invest the other to be able to sail through difficult times like when oil prices and volumes reduce,†he said.
Kiiza’s remarks come at a time when dreams of “petrodollars†have followed the discovery of oil and gas in commercial quantities in Uganda.
Confirmed oil reserves are about 2.5 billion barrels so far and are expected to reach five billion barrels.
This will generate about $2b every year.
However, most oil-rich countries in Sub-Saharan Africa are suffering from the so called “Dutch Disease†-an economic instability due to reliance on petroleum assets causing sharp inflow of foreign currency.
The foreign currency inflows lead to strong local currency, making the country’s other products less price competitive on the export market. This leads to higher levels of cheap imports killing local industries.
Fred Kabagambe-Kaliisa, the energy ministry permanent secretary, reaffirmed the need to have strong fiscal laws before oil production starts
“Our focus is to have strong laws and institutions in place to manage the oil resources and revenues,†he said.
“Without strong laws, the industry can cause instability. That is why we passed the income tax laws which contain taxing provisions relating to the oil and petroleum sector.â€
Oil cash can lead to robust and sustainable economic growth. This is only possible, if coupled with economic freedom, fighting corruption and better business conditions, experts say.
This calls for effective, transparent and accountable state structures, if the oil and gas resource is to translate into economic development.
Uganda could take advantage of the anticipated oil and gas revenue windfall to exploit other resources, invest in public and social infrastructure, giving the economy a significant boost.
UGANDA intends to create a special fund, where oil revenue will be separately deposited in a bid to avert economic instability arising from the discovery of oil reserves and natural resources.
Lawrence Kiiza, the economic affairs director in the finance ministry, said the fund would ensure transparent collection and utilisation of the oil revenue to ensure development. “The special fund will be in the central bank, but will be separate from the foreign reserves,†he said.
“This will ensure value for our money by investing in education, health, energy and roads through the budget process.†Kiiza was speaking at the East African Petroleum Conference and Exhibition (EAPCE’11) at Serena Hotel, in Kampala last week.
Uganda is hosting the conference for the second time. It is held on a rotational basis among the member states every two years.
The conference focused on the potential and investment opportunities in the oil and gas sector in East Africa.
“Harnessing East Africa’s Oil and Gas Potential and Utilising the Resources to Create Lasting Values†is this year’s theme. Kiiza said withdrawals from the fund would be controlled by clear rules supported by the law to be passed by Parliament.
“We must plan and save part of the oil money for the future generation, and invest the other to be able to sail through difficult times like when oil prices and volumes reduce,†he said.
Kiiza’s remarks come at a time when dreams of “petrodollars†have followed the discovery of oil and gas in commercial quantities in Uganda.
Confirmed oil reserves are about 2.5 billion barrels so far and are expected to reach five billion barrels.
This will generate about $2b every year.
However, most oil-rich countries in Sub-Saharan Africa are suffering from the so called “Dutch Disease†-an economic instability due to reliance on petroleum assets causing sharp inflow of foreign currency.
The foreign currency inflows lead to strong local currency, making the country’s other products less price competitive on the export market. This leads to higher levels of cheap imports killing local industries.
Fred Kabagambe-Kaliisa, the energy ministry permanent secretary, reaffirmed the need to have strong fiscal laws before oil production starts
“Our focus is to have strong laws and institutions in place to manage the oil resources and revenues,†he said.
“Without strong laws, the industry can cause instability. That is why we passed the income tax laws which contain taxing provisions relating to the oil and petroleum sector.â€
Oil cash can lead to robust and sustainable economic growth. This is only possible, if coupled with economic freedom, fighting corruption and better business conditions, experts say.
This calls for effective, transparent and accountable state structures, if the oil and gas resource is to translate into economic development.
Uganda could take advantage of the anticipated oil and gas revenue windfall to exploit other resources, invest in public and social infrastructure, giving the economy a significant boost.