Macro-economic Models: How to Spend Uganda’s Expected Oil Revenues? A CGE Analysis of the Agricultural and Poverty Impacts of Spending Options

Abstract

With the recent discovery of crude oil reserves along the Albertine Rift, Uganda is set to establish itself as an oil producer in the coming decade. Total oil reserves are believed to be two billion barrels, with recoverable reserves estimated at 0.8–1.2 billion barrels. This is comparable to the level of oil reserves in African countries such as Chad (0.9 billion barrels), Republic of the Congo (1.9 billion barrels), and Equatorial Guinea (1.7 billion barrels) but far short of Angola (13.5 billion) and Nigeria (36.2 billion) (World Bank 2010). Using a conservative reserve scenario of 800 million barrels, peak production, likely to be reached by 2017, is estimated by the World Bank to range from 120,000 to 140,000 barrels per day, with a production period spanning 30 years. A more optimistic scenario in this study is based on 1.2 billion barrels and sets peak production at 210,000 barrels per day (see Wiebelt et al. 2011). Although final stipulations of the revenue sharing agreements with oil producers are not yet known, government revenue from oil will be substantial. One estimate, based on an average oil price of US$75 per barrel, puts revenues at approximately 10–15% of GDP at peak production (World Bank 2010). The discovery of crude oil therefore has the potential to provide significant stimulus to the Ugandan economy and to enable it to better address its development objectives, provided oil revenues are managed in an appropriate manner.