Bank of Uganda backs new Finance Bill

Nov 21, 2013

PRESENTING the Bank’s views on the Bill currently being scrutinized by the finance committee, the Deputy Governor, Dr Louis Kasekende, said the Bill will also ensure macroeconomic stability

By Umaru Kashaka

The Bank of Uganda on Thursday agreed with the objective and the proposed amendments in the newly tabled Finance Bill 2012, saying the amendments will go a long way in strengthening the management of economic and financial matters of the economy.

Presenting the Bank’s views on the Bill currently being scrutinized by the finance committee, the Deputy Governor, Dr Louis Kasekende, said the Bill will also ensure macroeconomic stability, economic growth and national development plans when setting fiscal objectives within the macroeconomic framework.

“Specifically the amendments also look to commit the Government to efficient management of the oil revenues,” he told the committee chaired by the Kyadondo County North MP, Robert Sebunya.

Dr. Kasekende, however, warned that Section 73 of the Bill on petroleum revenue management which allocates 7 percent only to the districts where oil is produced could cause challenges.

“The sharing could include districts where the refinery is located, districts affected by the oil pipeline and where petroleum exploration is ongoing and the district’s social and economic situation,” he suggested.

He noted that the current Bill does not include measures to mitigate challenges associated with public investment management.

“Rapid scaling up of public investment is risky. Increases in spending may exceed the government’s planning, implementation, and management capacity,” he observed.

Adding: “There could be a justification for an independent statutory body to provide independent assessment of the infrastructure/Government development projects before being presented to the House for funding and to ensure that public sector demand is in line with sustainable rate of capacity growth.”

The Bank asked to be an ex-official in the appointment and qualifications of a five-member committee of investment advisory since it acts as an investment manager to provide technical advice.

On the establishment of the Petroleum Fund, Dr. Kasekende said it was an amendment to 52 which had provided for the petroleum revenue holding account and petroleum revenue investment reserve.

“This proposed amendment is agreeable provided that the Petroleum Fund is looked at as being constituted of a fund that will be towards the annual budget; a stabilization fund to take account of fluctuating oil prices and a permanent fund,” he said.

On cash, asset and liability management where the ministers may at the time of issue of any bills, bonds or stock, impose conditions, consistent with this Act as to all or the price of issue of the security and rate of interest, Dr. Kasekende said the ministers might not be able to determine the price of the Treasury Bill and Bond as these are market determinants.

On the amendments of the Bank of Uganda Act, Cap 51, cap 340 and the National Audit Act, 2008, he said in view of the high possibility of signing the protocol establishing the East African Monitory Union on at the end of this month, which allows no borrowing from the central banks, the borrowing limit of 8% based on the previous year’s recurrent revenues should be reduced to a number close to zero.

“This limit which must be repaid using the current fiscal year’s revenues could face challenges. The limit should be based on the current year’s projected recurrent revenues,” he advised.

The Leader of Opposition Nandala Mafabi requested the new Bill be reprinted and re-tabled in afresh in the House because the Government came up with 55 new amendments which were not gazette.

“This Bill should be reprinted because the law is not for MPs only; for all Ugandans. Some of us are not confortable with the Bill and we may do wrong things,” he appealed.

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