MORTGAGING UGANDA OIL REVENUES

 Borrowing against oil revenues is purely an economic decision, right decisions means gaining good value from the country’s’ resource and a wrong decision means carrying the resource burden generation after generations. Uganda is at that point of making   a borrowing decision against oil revenues which either turns into a curse or blessing. The country needs infrastructural sector developments that require huge sums of money not easily accessible domestically. This will automatically affect the external debt and change the entire facet of Uganda economy. But Maria Kiwanuka the minister of finance says, there are mitigation measures to ensure Uganda takes good and cost effective borrowing deals.

There are reports of growing pressure   from international lenders with finance options eying repayments when Uganda oil and gas production begins most likely in 2018.  But the decision to borrow against oil revenues is purely economic, speculators and mediocre ought not to be part of it. Experts in the extractive industry say that if a country develops its internal capacities in the extractive management, it is positioned better to attract a better borrowing-deal against oil than a country that relies on external advisory to make decisions in the sector.

Depending on how cost effective the borrowing deal could be, the decision must be made in reference to the consequences of the loan facility acquired. Lenders will always want to offer funds with anticipation of bigger returns and often take advantage of the loopholes within the borrowing country’s abilities in regard to oil and gas management.

Uganda in particular, clearly has the need to borrow, especially at the time when a lot infrastructural developments are expected to support oil and gas activities. But the minister of Finance Maria Kiwanuka says, despite the need for money, the decision to borrow against oil and gas   cannot be done in panic just because the funders are on pressure, critical analysis of the source of the funds and their cost take precedence. This is also followed by the choice of investment for which the oil and gas revenues should be mortgaged.

According to figures from the ministry of Finance, Uganda’s current debt has escalated to 5.8 billion US dollars as by June last year from around 2.4 billion US dollars the previous financial year. But according to the International Monetary Fund Uganda’s’ external debt is still within its ceiling and manageable limits.

Uganda gained from a debt cancellation under the Heavily Indebted Poor Countries in the early 2000 acquiring a debt reduction of to $2 billion and in 2006 Uganda benefited from the Multilateral Debt Relief Initiative, which barks up the present manageable external debt.

But now that there is need for infrastructure development in the oil and gas sector which include the   refinery, pipeline, roads, railways and airports external financial borrowing may not be easy to avoid.