Dr Ezra Suruma, the former Finance Minister wants oil revenues used to recapitalize government owned banks and setup development banks. Parliament is currently debating how oil revenue will be managed.
While speaking during a lecture “Access to Business Finance: Hurdle or Opportunity for Small and Medium Enterprises in Uganda?” at Makerere University, Dr Suruma said he was lobbying government for at least a fraction of the money made from oil to be used to strengthen locally owned banks.
The Public Finance Management Bill 2012, currently at committee level in parliament, indicates that all revenue collected should be placed in a Petroleum Fund and that all withdrawals to be made are for the consolidated fund, supporting the annual budget and to the Petroleum Investment Reserve. The Petroleum Investment Reserve provides for investments to be made abroad in financial instruments like securities. Suruma will have his work cut out in trying to drive his agenda for investing the money home as the bill specifically prohibits investment in an organization controlled and owned by Ugandans.
“For avoidance of doubt, monies from the Petroleum Investment Reserve shall not be invested in any instrument issued by a bank or corporation which is, or an individual who is resident in Uganda or bank or corporation which is owned and controlled by a Ugandan National or which is registered in Uganda,” the bill reads. Dr Suruma wants development banks setup to support Ugandan entrepreneurs; especially SME’s that have struggled to access affordable capital from commercial banks.
The agricultural sector also only gets 7percent of the total loans to the private sector.
The government owns 100percent of Uganda Development Bank – currently being recapitalized to lend at lower interest rates – and Housing Finance Bank, which is supposed to support the construction and mortgages in Uganda. Dr Suruma has previously criticized the Public Finance Management Bill, 2012 saying it is weak if passed in its current state. The finance minister, Maria Kiwanuka has since come-up with amendments. The bill is supposed to guide the country on how oil revenues will be managed to avoid possibilities of it being siphoned, through corruption and avoid distorting the economy.