The government must come up with regulations to guide how earnings from the oil gas sector are to be invested.
Paul Bagabo, a senior officer with Natural Resources Governance Institute in Uganda said there is no publicly available legal requirement detailing asset classes to be invested in with earnings from Petroleum funds.
“The government should adopt law setting up a firm numerical fiscal rule governing the public expenditure of our oil and gas revenues. And establish an oversight authority to ensure compliance is regularly monitored
The Petroleum fund should set numerical rules governing deposits and withdrawals as well as firm rules governing the investment of oil revenues” said Bagabo.
Bagabo was speaking at the virtual launch of the 2021 Resource Governance Index. The index found improvements in the country’s governance of the oil and gas sector.
Bagabo and other civil society working around accountability and transparency in the Extractive Industry says some of the existing laws have not been implemented as required.
Earnings from the oil sector are managed under Public Finance Management Act 2015, which provided for the Petroleum Fund in which government revenues from petroleum activities are deposited.
The same law provides that withdrawals from the Petroleum Fund to the Consolidated Fund for expenditure on government budget requirements for infrastructure and development projects; are subject to Parliamentary approval by way of an Appropriation Act.
According to Bagabo some aspects of the Public Finance Act relating to the Oil and gas sector have never been operationalize and yet they are crucial now as oil and gas revenue is expected for the construction of the East African Crude Oi pipeline (EACOP) and the multi-billion dollar Tilenga project in the Albertine.
Bagabo said the Ministry of Finance should have already put in place the charter of fiscal rules on how the money from oil is invested. With the Energy transition debate, there is fear that the government may invest in assets that may become “stranded”.
“A transparent and accountable oil and gas regime would ensure that revenues from oil operations are invested wisely to avoid ‘stranded assets’ as importing countries reduce their appetite for fossil fuels.” he noted.
The Parliament in December 2016 approved the Charter For Fiscal Responsibility as required by section 5 of the Public Finance Act 2015. The Charter signed by Finance Minister, Matia Kasaija covered the period running from Financial years 2016/2017-20/21.
Under the charter, the ministry was required to come up with petroleum investment management policy framework.
But the framework and related requirements have never been updated.
Reports from Parliament and the Auditor General have in the past raised concerns about withdrawals from the Petroleum Fund. Some of the Money was used to finance the budget in 2019.
Finance Ministry’s Director For Economic Affairs, Moses Kagwa confirmed that the charter was yet to be updated.
“We have submitted the second charter for fiscal responsibility to parliament. And in that charter there is how much oil revenues are going to be removed from Petroleum fund for use in financing the budget that has been done going forward.” Said Kagwa
The Petroleum Fund which is managed by the Bank of Uganda has been operational since 2015. It is subject to periodic audits by the Auditor General. While accepting that the charter is not in place, Ali Ssekatawa the Petroleum Authority’s Director For Legal and Corporate Affairs in an earlier engagement told URN that the existing laws and institutional safeguards can eliminate the abuse of the Petroleum fund.
He said a body to guide oil and gas revenue management is now under a body headed by Professor, Samuel Sejjaka.
The call for proper investment and management is based on the need to avoid the so-called Dutch disease or oil curse suffered by countries like Nigeria which has just come up with a new law on oil and gas.