Uganda government is spending more than a third of its nascent Petroleum Fund before it produces any oil as it struggles to narrow its budget gap while increasing infrastructure investments.
A sum of Ugx. 200 billion shillings ($54 million) was removed from the fund to help finance spending plans for the year through June, leaving 288.7 billion shillings in the account, the Finance Ministry said in a report on its website.
A 125.3 billion-shilling withdrawal was made the previous year.
Government is implementing a 32.7 trillion-shilling budget for 2018-19, partly to fund development of hydro-power plants and roads.
That contributed to a fiscal deficit of 6.6 percent of gross domestic product this year, leaving the government with the need to raise funds from elsewhere to plug the gap.
According to Bloomberg, government aims to narrow the deficit to 5.6 percent in 2019-20, according to budget documents.
Given the deficit, financing from the fund is welcome provided it’s used for infrastructure projects, said Augustus Nuwagaba, director of Kampala-based Reeve Consults Ltd. It would be a problem “if the money was spent on consumption,” Nuwagaba told Bloomberg.
read: Only oil money can rescue Uganda from the looming debt crisis –BoU official
The government started the Fund in 2015 to receive revenue-deposits from oil-related activities including what’s generated from the output as well as pre-production transactions. It’s managed by the nation’s finance ministry.
read:Looming debt crisis: Uganda’s Public debt hits $15bn or 50% of GDP- Bank of Uganda report
France’s Total SA, Cnooc Ltd. of China and London-based Tullow Oil Plc are developing Uganda’s crude finds estimated at 6 billion barrels of oil resources, with production estimated to start in 2022.
// bloomberg
