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Shs 2.3 trillion from oil disputes already spent

At least 85 per cent of what Uganda earned after it won two disputes with global oil companies has already been spent, a government report says.This revelation is contained in the Bank of Uganda annual report 2016/17, the first official acknowledgement that much of the money was used. The two tax disputes generated $728,758,293 since 2010, the report said.The central bank reported that $434 million was from Heritage Oil while $250 million was capital gains tax from Tullow Oil. Another $43,833,312 was in stamp duty.Of this, BOU revealed, $620,582,750 was spent in the national budget. It didn’t mention in which vote or particular year.This goes against a promise BOU governor Tumusiime-Mutebile made to a parliamentary ad hoc committee investigating corruption in the oil sector. Mutebile told the committee that money from these disputes would replenish the country’s foreign reserves, which had been used to buy jet fighters.On June 15, 2011 Mutebile told London’s Financial Times that up to $400 million was drawn from the bank to buy Russian-made jets and that President Museveni had promised him that this money would be recovered from anticipated oil revenues.On Thursday, October 26, an official at BOU said the money has helped pay for Karuma and Isimba hydropower dams construction.Jim Mugunga, ministry of Finance spokesperson, later told The Observer: “Government revenue comes from multiple sources and becomes part of the overall resource envelope that is considered during the budget process.”“Our duty is to enable sectors spend as appropriated. We hardly colour or baptise monies according to their sources unless explicitly provided under guidelines or specific laws.”In the report, BOU says the money was spent before the establishment of the Petroleum Fund, which should hold all revenues from the oil sector.According to the 2012 oil revenue management policy, “all oil revenues shall be collected and deposited in a special petroleum fund to be established in Bank of Uganda.”“This will include the sale of government’s share of oil extracted that will be received in kind,” the policy reads.Government received the first batch of money from the oil disputes on August 4, 2010. At least $121.5 million of it was from Heritage Oil Limited and UK’s Tullow Oil Ltd deal in which the former had transferred its Ugandan assets.The other money resulted from the dispute between Uganda and Tullow after the latter sold its blocks to China National Offshore Oil Company and Total E&P. Tullow agreed to pay $250 million. As at March 2017, Uganda had received $728 million from two oil disputes, including stamp duty.Government had created the Oil Revenue Account in BOU where this money was to be held so as not to mix it with other Consolidated Fund receipts.In 2015, the Petroleum Fund was established under the Public Finance Management Act (PFMA) 2015 to facilitate the efficient management of Uganda’s petroleum resources. The law says all petroleum revenues, which accrue to government be collected or received by the Uganda Revenue Authority (URA) and paid into the Fund.As a result, ministry of Finance opened an account at BOU to separate petroleum revenue from other government revenues in order to ensure transparency and accountability, the central bank said.The law limits withdrawals from the Petroleum Fund, which can only be done with permission granted by an Appropriation Act and a warrant of the auditor general to support the annual budget. It can also be kept in the Petroleum Revenue Investment Reserve for investments.With the creation of the petroleum fund, the oil revenue account was consequently closed in June 2015. This meant that all monies which had been received should have been transferred to the petroleum fund.Appearing before parliament’s committee on Commissions, Statutory Authorities and State Enterprise  on March 7, 2017, ministry of Finance officials were asked to explain why they had not transferred the money from government’s oil revenue account to the newly created petroleum fund.Godfrey Semugooma, commissioner financial management systems at the ministry of energy, told MPs then that when the fund was opened in March 2015, the money that was on government oil accounts was transferred to the consolidated fund.For his part, ministry of finance permanent secretary and secretary to the treasury Keith Muhakanizi told parliament they had not made transfers to the petroleum fund because there had been delays in putting in place a law.He also said his ministry needs to come up with a clear framework on how the petroleum account would operate.BOU said in the report: “Revenue received into the oil revenue account was spent by the government through the budget.”One analyst told The Observer that government has been under pressure to spend especially with the bloating cost of administration. Administration units in terms of number of districts, municipalities, and town councils have grown to unprecedented numbers in the past five years.Also, the number of parliamentarians and ministers have grown, which means government’s appetite to spend had to swell. Meanwhile, the 2016 general elections were around the corner.With limited revenues collected from other sources, it is possible that this money from oil disputes became inevitable target.According to the BOU report, since the fund’s establishment in March 2015, oil revenue amounting to $109 million and Shs 30.9 billion had been received as at June 30, 2017.In the 2016/17 financial year, a total of $36,897,062 was received which includes the last instalment on the capital gains tax Tullow Oil Ltd paid.As at June 30, 2017 the available money had earned government $473,928 in interest. BOU says because of an absence of the investment policy and appropriations of the petroleum revenue, the Petroleum Funds continues to be held on call with minimum interest benefits.