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Managing future oil revenue in Uganda for agricultural development and poverty reduction: A CGE analysis of challenges and options

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  • Wiebelt, Manfred
  • Pauw, Karl
  • Matovu, John Mary
  • Twimukye, Evarist
  • Benson, Todd

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. At peak production, likely to be reached by 2017, oil output will range from 120,000 to 210,000 barrels per day, with a production period spanning up to 30 years. Depending on the exact production levels, the extraction period, the future oil price, and revenue sharing agreements with oil producers, the Ugandan government is set to earn revenue equal to 10–15 percent of GDP at peak production. The discovery of crude oil therefore has the potential to provide significant stimulus to the Ugandan economy and address its development objectives. However, this is subject to careful management of oil revenues to avoid the potential pitfall of a sudden influx of foreign exchange. Dominating the concerns is the potential appreciation in the real exchange rate and subsequent loss of competitiveness in the nonresource tradable goods sectors such as agriculture or manufacturing (Dutch Disease). These sectors are often major employers in developing countries and the engines of growth. Several mitigation measures can be employed by government to counter Dutch Disease, including measures that directly counter the real exchange rate appreciation or measures that offer direct support to traditional export sectors in the form of subsidies.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 1122.

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Date of creation: 2011
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Handle: RePEc:fpr:ifprid:1122

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Keywords: crude oil; agricultural competitiveness; general equilibrium modeling;

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References

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Cited by:
  1. Morley, Samuel & Piñeiro, Valeria & Robinson, Sherman, 2011. "External shocks and policy alternatives in small open economies: The case of El Salvador," IFPRI discussion papers 1134, International Food Policy Research Institute (IFPRI).
  2. Laborde Debucquet, David & Martin, Will & van der Mensbrugghe, Dominique, 2011. "Measuring the impacts of global trade reform with optimal aggregators of distortions:," IFPRI discussion papers 1123, International Food Policy Research Institute (IFPRI).
  3. Glendenning, Claire J. & Asenso-Okyere, Kwadwo & Babu, Suresh C., 2011. "Evaluation of value-added agricultural advisory services: Case study of agriclinics in Southern India," IFPRI discussion papers 1125, International Food Policy Research Institute (IFPRI).
  4. Takeshima, Hiroyuki & Salau, Sheu, 2011. "How does ownership of farm implements affect investment in other farm implements when farmers' liquidity constraint is relaxed?: Insights from Nigeria," IFPRI discussion papers 1133, International Food Policy Research Institute (IFPRI).
  5. Morley, Samuel & Piñeiro, Valeria & Robinson, Sherman, 2011. "A dynamic computable general equilibrium model with working capital for Honduras:," IFPRI discussion papers 1130, International Food Policy Research Institute (IFPRI).
  6. Yu, Bingxin & Nin-Pratt, Alejandro & Funes, José & Gemessa, Sinafikeh Asrat, 2011. "Cereal production and technology adoption in Ethiopia:," IFPRI discussion papers 1131, International Food Policy Research Institute (IFPRI).
  7. Dorosh, Paul & Thurlow, James, 2012. "Can Cities or Towns Drive African Development? Economy-wide Analysis for Ethiopia and Uganda," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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