Uganda Makes Second Withdrawal From Oil Fund Before Production

KAMPALAI (Capital Markets in Africa) – Uganda withdrew from its nascent Petroleum Fund for a second time before it starts producing oil, as the East African nation struggles to narrow its budget gap while increasing infrastructure investments.

A sum of 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. This follows a 125.3 billion-shilling withdrawal the previous year.

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.

The government of East Africa’s third-biggest economy is implementing a 32.7 trillion-shilling budget for 2018-19, partly to fund development of 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.

The government targets to narrow the deficit to 5.6 percent in 2019-20, according to budget documents.

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.

Source: Bloomberg Business News