{"id":3886,"date":"2015-10-07T20:28:33","date_gmt":"2015-10-07T20:28:33","guid":{"rendered":"http:\/\/www.oilnewskenya.com\/?p=3886"},"modified":"2015-10-07T20:28:33","modified_gmt":"2015-10-07T20:28:33","slug":"ugandas-oil-revenue-management-framework-is-a-solid-start-but-not-nearly-enough","status":"publish","type":"post","link":"https:\/\/www.oilnewskenya.com\/index.php\/ugandas-oil-revenue-management-framework-is-a-solid-start-but-not-nearly-enough\/","title":{"rendered":"Uganda’s Oil Revenue Management Framework is a Solid Start, but Not Nearly Enough"},"content":{"rendered":"

Source: resourcegovernance.org<\/p>\n

Earlier this year, Ugandan President Yoweri Museveni signed the\u00a0Public Finance Management Act (PRMA) 2015<\/strong><\/a>\u00a0into law and created one of the world’s newest sovereign wealth funds. While the law provides a solid framework for effective governance, several key elements are missing\u2014elements that would determine whether\u00a0Uganda will truly benefit<\/strong><\/a>\u00a0from its oil windfalls.<\/p>\n

A strong legal framework for managing petroleum revenues is fundamental for transforming oil in the ground into sustainable long-term development above it. The\u00a0volatility of oil prices<\/strong><\/a>\u00a0can make budgeting very difficult and result in wasteful spending or debt crises. In turn, this can frustrate popular expectations and lead to political instability. Legislating how petroleum revenue should be managed is a step in the right direction.<\/p>\n

The Ugandan act includes provisions for petroleum revenue management as well as a mechanism for sharing a small portion of royalties with local governments in the oil-producing Albertine Grabben. Of note, Section 62 of the PFMA creates a sovereign wealth fund (SWF)\u2014called the Petroleum Revenue Investment Reserve\u2014to be held at the Bank of Uganda. The law also outlines provisions for the management and governance of the fund.<\/p>\n

As oil revenues are only expected to contribute modestly to government revenues, and may not materialize for many years, the legitimate emphasis of the PFMA is on budget responsibility. To that effect, a strong role is carved out for parliamentarians to hold the government accountable through a Charter of Fiscal Responsibility\u2014a contract that will bind the executive to revenue generation, public spending and debt targets. Other provisions, like the public reporting on performance and activities of the petroleum fund, will help parliament to properly oversee oil revenue management.<\/p>\n

A SWF will not guarantee sound management of Uganda’s oil revenues. NRGI’s applied research of natural resource-based\u00a0SWFs<\/strong><\/a>\u00a0reveals that some funds, such as those in Chile, Norway and several US states, have indeed benefited their citizens. Funds are not only a potential source of savings\u2014they can also mitigate budget volatility, improve public investment decisions, and help sterilize large inflows of foreign capital in order to preventDutch disease<\/strong><\/a>. Too often, though, SWFs simply act as slush funds for ruling regimes and serve as channels for patronage and corruption, as seen in\u00a0Azerbaijan<\/strong><\/a>,\u00a0Libya<\/strong><\/a>\u00a0andVenezuela<\/strong><\/a>.<\/p>\n

The Ministry of Finance, Planning and Economic Development must improve the PFMA and prevent the new fund from becoming an unaccountable slush fund.\u00a0NRGI’s analysis<\/strong><\/a>reveals that the management of petroleum revenues could be bolstered by:<\/p>\n