By Ben Musanje
Uganda’s Petroleum Revenue Investment Reserve could accumulate to about Shs19.6 trillion by FY2030/31, according to the Bank of Uganda, as the country prepares to manage a growing pool of petroleum-related Government assets.
In its assessment of the proposed Charter of Fiscal Responsibility for FY2026/27 to FY2030/31, BoU said petroleum revenues will be received in US dollars and invested under the petroleum revenue investment framework.
The central bank stressed that the Petroleum Revenue Investment Reserve assets belong to Government and are not part of BoU’s balance sheet or official foreign-exchange reserves.
The oil-related assets will be held in segregated foreign-currency accounts and invested in foreign-currency-denominated instruments.
BoU will act as the operational manager of the funds under the Public Finance Management Act and the Operational Management Agreement with the Ministry of Finance.
Offshore investments to shield domestic liquidity
BoU said petroleum revenues invested offshore will not directly expand domestic liquidity.
The potential liquidity impact will instead arise when money is withdrawn from the Petroleum Fund and transferred to the Consolidated Fund to finance the annual budget.
Withdrawals from the Petroleum Fund are capped at 0.8% of the preceding year’s estimated non-oil GDP.
The central bank said the extent of any liquidity impact will depend on the composition of Government expenditure after the funds are transferred into the domestic economy.
If the withdrawal results in a shilling liquidity injection that threatens macroeconomic stability, BoU said it would take appropriate action.
The distinction means petroleum revenues can accumulate in the investment reserve without immediately increasing the amount of money circulating in Uganda’s domestic economy.
Shs19.6 trillion reserve by FY2030/31
BoU projects the Petroleum Revenue Investment Reserve to reach approximately Shs19.6 trillion by FY2030/31.
The funds will remain Government assets and will be invested in accordance with the petroleum revenue investment policy issued by the Minister, on the advice of the Investment Advisory Committee.
The policy requires petroleum investments to be undertaken in a manner that does not jeopardise Uganda’s macroeconomic stability.
The central bank’s role will therefore involve managing the petroleum assets while ensuring that their investment and eventual use do not create destabilising effects on the domestic economy.
Spending will determine monetary impact
BoU said the key monetary issue will not be the accumulation of petroleum revenues itself, but how and when those revenues are brought into the domestic economy.
Money kept in foreign-currency investments offshore does not directly inject liquidity into Uganda.
However, once petroleum revenues are withdrawn to support the annual budget, the resulting Government expenditure could increase shilling liquidity.
The impact will depend on what the money is used for and the pace at which it enters the economy.
BoU said it would monitor these developments and act if necessary to prevent distortions to macroeconomic stability.
Fiscal discipline remains critical
The central bank linked petroleum revenue management to Uganda’s wider fiscal path.
BoU said the current fiscal plan is consistent with its medium-term inflation objective, but warned that significant changes in Government spending, taxation, deficits or borrowing could create inflationary pressures.
Large deviations from the fiscal path could also raise expectations of larger budget deficits and borrowing requirements, potentially weakening confidence in financial markets.
If the fiscal path becomes inconsistent with macroeconomic stability and threatens higher inflation and lower growth, BoU said it would tighten monetary policy and advise the Minister of Finance accordingly.
With the Petroleum Revenue Investment Reserve projected to reach Shs19.6 trillion, the management of Uganda’s oil revenues is set to become an increasingly important part of the country’s fiscal and monetary framework. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
