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Oil money: Is gov’t emptying the Petroleum Fund?

Finance Minister Matia Kasaija

Latest reports on the
inflows, outflows and assets of the Fund reveal a patterns of irregular
withdrawals of monies to the consolidated fund to finance budget deficits.

A new report from the Ministry of Finance, Planning and Economic Development reveal
that has withdrawn Shs 200bn from the Petroleum Fund to finance budget
deficits. A semi-annual report to Parliament on the inflows, outflows and
assets of the petroleum fund for the period ended 31st December,
2018 indicate the money was withdrawn to finance the 2018/2019 budget
priorities. The report is authored by Matia Kasaija, the Minister of Finance,
Planning and Economic Development.

According
to the report, by June 2018, the Fund had Shs 507 billion mainly from Capital
Gains Tax, surface rentals, technology and training fees from oil companies as
well as signature bonuses from the signing of Production Sharing Agreements
with Nigeria’s Oranto Petroleum Limited and Australia’s Armour Energy Ltd.

According
to the report, the Fund stands at Shs 288.7bn as at December, 2018.  “This is a reduction in the Fund value
reported as in June 2018 report, which stood at Shs 507 billion,” the report
notes. “The report details the status of the Fund for six months ending 31st,
December, 2018.

“In
accordance with section 61(1) of the Public Finance Management Act, 2015 as
amended, this is to lay on table the semi-annual report of the Petroleum Fund
for the financial year 2018/2019,” Kasaija’s wrote in a letter forwarding the
report to the Speaker of Parliament. Kasaija’s letter is dated March, 28th,
2019. The Public Finance and Accountability Act, 2015, mandates the Minister of
Finance to report to parliament on the status of the Fund in terms of inflows,
outflows and assets every after six months.

Justifying
the withdrawals, Lawrence Semakula, the Accountant General recently said, “We
have all these priorities such as financing infrastructure, so what do we do
when we have a deficit. Rather than go out and borrow, we would rather use the
money from the Fund,” he told Members Parliament.

The
report notes that since production has not yet started, nil volumes and values
of petroleum production have been reported.

“The
further notes that during the reporting period, URA collected petroleum related
taxes worth Shs 30.3bn of which Shs 2.5bn had not been submitted to the Fund by
closing of the reporting period,” the report reads in part.

WORRYING TREND

Analysing
the audited reports from the Petroleum reveal a trend of withdrawals that the Office
of the Auditor General (OAG) has sometimes described as irregular.  For instance, a report for 2017 reveals that in
November, 2017 Shs 125 billion was transferred from the Petroleum Fund to the
consolidated fund to finance budget. Another Shs 200bn was also withdrawn from
the Fund to the consolidated fund to finance 2018/2019 budget priorities.

The
Auditor General in a report to parliament described the withdrawal as irregular
since it didn’t follow the procedures and processes laid down in the Public
Finance and Accountability Act, 2015. The same Act, ring fences oil revenues to
finance only infrastructure projects following an Appropriation Act.

BANK ACCOUNT IN NEW
YORK

The
Petroleum Fund is maintained in two separate accounts in the Bank of Uganda
(BoU) –one account denominated in Uganda Shilling (UGX) and another in United
States Dollars. “Another account was opened in the Federal Reserve Bank of New
York to facilitate investments of the fund under the Petroleum Revenue
Investment Reserve,” the report reads in part.

Edward
Ssekika