The absence of fiscal rules to guide transfers of petroleum revenue to the Petroleum Fund and Petroleum Revenue Investment Reserve (PRIR) is likely to lead into irrational decisions by the Ministry of Finance, leading to heavy financial losses in the oil sector.
This was revealed by Auditor General John Muwanga while presenting the report for the year ending June 2019 to the Speaker of Parliament Rebecca Kadaga.
The report cited a lot of gaps in the administration of oil and petroleum sector, warning that if not addressed, revenue from this resource envelope will be misused.
Oil and gas resources are finite and the associated revenues can be immense.
However, if not well managed, these revenues have the potential to undermine the macroeconomic, budgetary and governance structures that have been built over the last two decades leading to waste.
In order to sustain the economic and social transformation process beyond the oil and gas era, experts say Uganda has to manage the oil and gas revenues in manner that will encourage other sources of wealth creation.
Whereas Shs 200 billion has so far been transferred from the Petroleum Fund to the Treasury, Muwanga observed there was no clear explanation on which infrastructure and development projects were to be funded by the oil revenues.
“Lack of a fiscal rule can lead to undesirable spending and investment decisionS by government that may not be economical. Much as government appointed an Investment Advisory Committee (IAC), there was no approved petroleum investment policy and investment framework,” Muwanga noted.
He warned that delay to have this arrangement in place could affect appropriation of these funds towards supporting infrastructural projects.
“The funds will continue to remain unutilized on the petroleum fund account without maximizing any return that could have been obtained if the funds were invested without causing undue risk to the PRIR,” he warned.
In her remarks, Kadaga vowed to reignite debate on the management of the Petroleum Fund as soon as Parliament resumes work on January 21 2020.
“In my communication on Tuesday, I speak about some of these things because it seems they have slipped under the table especially things like the petroleum fund,” she said, adding, “We need to light some fire.”