Government again withdrew Shs255 billion from the Petroleum Fund to the Consolidated Fund to finance the 2019/2020 budget deficit, a new report revealed. The withdrawal further diminished the total value of the Fund that now stands at a paltry Shs76 billion.
A report by Parliament’s Budget Committee on the Annual Budget Estimates for the financial year 2020/2021 that Oil in Uganda obtained, revealed that the money was withdrawn from the Petroleum Fund in September 2019. The Budget Committee discovered this while scrutinizing the budget estimates for the financial year 2020/2021.
“As at end of December 2019, the value of the Petroleum fund stood at Shs76.09 billion compared to Shs311.13 billion as at the end of June 2019,” the Committee report read in part.
It adds, “This decline is attributed to a transfer of Shs255 billion into the Uganda Consolidated Fund in September 2019 to finance the budget deficits.” Sometime back, Oil in Uganda reported how the Fund value had dwindled from Shs470 billion in June, 2018 to Shs311.1 billion in June, 2019.
The withdrawal of Shs255 billion is less by Shs190 billion that Government had anticipated to withdraw from the Fund to finance the 2019/2020 budget. “Government anticipated to receive Shs197.7 billion in form of Capital Gains Tax [CGT] from oil companies but only received Shs23.6 billion [Shs21.1bn oil related taxes, Shs2.55bn Non- Tax Revenues) as at end of December 2019, which was paid into the Petroleum Fund.” the Committee’s report noted.
Empty Fund?
With only Shs76 billion, the Petroleum fund is as good as empty due to Government’s uncontrolled withdrawals. Appearing before the Budget Committee of Parliament to defend the Budget Framework Paper in January, 2020, David Bahati, the Minister of State for Finance in charge of Planning said that the Petroleum Fund had been exhausted.
“There is no money in the Petroleum Fund. We [Ministry of Finance, Planning and Economic Development] appropriated what was there last financial year… so we cannot get what is not there,” he told the Committee.
He however, clarified that the Fund only had Shs70 bn – perhaps too little money to be earmarked to support the budget for the next financial year 2020/2021.
“The Petroleum Fund is not empty, there is Shs70 bn in our Fund and we use this fund according to the law, we follow the laid down procedures and we have never picked this money without the knowledge of parliament,” Bahati clarified in a subsequent appearance before the Committee. Should more money be paid into the Fund, Government could still withdraw the money to finance next year’s budget.
Worrying patterns of withdrawals
Since its establishment in 2015, Government has been withdrawing money from the Petroleum Fund to finance the budget. For instance, in November, 2017, Government withdrew Shs125.6 billion from the Fund to finance the budget for the financial year 2017/2018. Again, Government withdrew Shs200 billion from the Petroleum Fund to the Consolidated Fund to finance the budget of financial year 2018/2019 and lastly, Shs225 billion to finance the budget for financial year 2019/2020 out of Shs445 bn Government had anticipated to withdraw.
At the time it was established in 2015, the oil revenue account in Bank of Uganda had Shs1.36 trillion that had accrued from petroleum activities over the years, that could have been the Fund’s opening balance. However, instead the Ministry of Finance, Planning and Economic Development (MoFPED) transferred the money to the Consolidated Fund to finance the budget.
The Fund is meant to finance the annual budget and save money for investment for the future generation. The Public Finance Management Act, 2015 ring fences petroleum to finance only infrastructure projects. However, with uncontrolled withdrawals, it remains to be seen whether the Fund will grow and later on fulfill its aim of financing infrastructure projects and saving and investing for the future. It is also not clear whether the money is utilized in accordance with the Public Finance Management Act.
Last year, civil society organizations under their umbrella, Civil Society Budget Advocacy Group (CSBAG), asked parliament to amend the Public Finance Management Act, 2015 to introduce a cap of how much Government can withdraw from the Petroleum Fund in a financial year as a measure to tame government uncontrolled withdrawals.
“We need to [amend the law] to put a certain percentage for appropriation so that we can have some money for investment purposes. The way things are, there is no evidence that the oil money has gone into infrastructure development,” Julius Mukunda, the Executive Director, CSBAG told journalists last year.
The Budget Committee of Parliament in the report for last year, also cautioned government to control its appetite for resources from the Petroleum Fund. The Petroleum Fund operates three Accounts – a dollar and a Uganda Shillings account in Bank of Uganda and another Account in the Federal Reserve Bank, New York, USA.
By Edward Ssekika
Edited by Muhumuza Didas