ABSTRACT
This chapter explores how Uganda can avoid the mistakes made by countries that have successfully managed their oil discoveries by emphasising economic and political diversification away from excessive dependence on oil and other natural resources, as well as aspects of the Dutch disease and how to stay clear of it. The aspect of the Dutch disease brings fiscal policy into the story because it often takes a fiscal correction to create conditions for establishing a competitive value of the local currency. Several channels through which natural resource wealth may prove to be a mixed blessing can be placed under the headings of human, physical, social and financial capital. Empirical evidence suggests that financial development is a significant source of economic growth, physical capital accumulation, and improvements in the efficiency of capital allocation. For a new resource-rich country such as Uganda, the efficiency of public expenditure will be crucial to prepare for the advent of resources from oil and other extractives.
