Since its establishment in 2015, the Uganda Petroleum Fund has been dwindling in value due to several withdrawals by Government to finance the budget deficits - which at one point the Office of the Auditor General (AOG) described as irregular.
Now, the latest audited accounts reveal that the Fund's value has further dwindled to Shs 311.1 billion by the end of June 2019. This is a reduction of the Fund's value from Shs 470.4 billion that was reported in June, 2018. The audit report details total revenues collected from petroleum related activities and a summary of outflows from the Fund from June 30, 2018 to June 30, 2019.
The Public Finance Management Act 2015 established the Petroleum Fund into which petroleum related revenues are deposited. The Act also bestows the overall responsibility of managing the fund with the minister responsible for Finance.
"The Fund value as at June 30,2019 was Shs 311.1 billion [Shillings three hundred and eleven billion). This is a reduction in the Fund value from 470.4 billion reported for the period ended June 30, 2018," the audit report reads in part.
The 13 - page annual report on inflows, outflows and assets of the Petroleum Fund released by the Minister of Finance, Planning and Economic Development (MoFPED) Matia Kasaija is dated January 13, 2020.
The audits are conducted by the Office of the Auditor General and its conducted twice a year - June and December. The report attributes to dwindling value of the Fund to Government withdrawals to finance the budget for the financial year 2018/19, reduction in revenues collected and foreign exchange losses.
For instance, Government withdrew Shs 200 billion to support the annual budget for the financial year 2018/19. "In line with section 59 of the Public Finance Management Act 2015 and the Appropriation Act, a sum of Shs 200 billion from the Petroleum Fund was transferred to the consolidated fund to fund the financial year 2018/2019 budget. This was the second time funds have been withdrawn from the Fund to support the annual budget,"
Sources of money
The report notes reduction in revenues collected in the last one year from petroleum related activities owing to inactivity in the sector. For instance, the report notes a reduction in revenues collected of Shs 6 bn from June 2018 - June 2019. In the period ending June 30, 2018, Shs 62.9 billion was collected compared to Shs 56.74 billion that was collected for the period ending June 30, 2019.
The report further attributes to the dwindling value of foreign exchange loss. "Foreign exchange loss on funds from the Petroleum Authority of Uganda amounting to Shs 120.8 billion. This was due to the appreciation of the Shilling against the United States Dollars at the time the funds were received on the Petroleum Fund US dollar account,"
"Since production has not yet commenced, nil volumes and values of petroleum produced have been reported," the report reads in part. The Fund is composed of collections by Uganda Revenue Authority (URA) of tax refunds, income tax, Value Added Tax (VAT), withholding tax, surface rentals, training fees, sale of data, business licenses and signature bonusses paid by companies dealing in petroleum activities among others.
Uganda is yet to formally sign up to the Extractive Industries Transparency Initiative (EITI) and it is widely believed that once Uganda becomes a participating member, there is hope for better management practices of the petroleum fund. What should also be appreciated is that the vigilance and capacity of stakeholders to monitor and hold power centers accountable with regard to petroleum affairs and especially the funds shall be paramount.