The Independent Uganda: You get the Truth we Pay the Price
Kampala, Uganda | THE INDEPENDENT | Parliament’s Finance Committee has summoned the Bank of Uganda Governor Emmanuel Tumusiime Mutebile to explain the continued recapitalization of the institution.
This follows a fresh request by the Ministry of Finance to recapitalize the Central Bank with Shillings 481.7 billion Shillings in the coming financial year 2020/2021. The proposal which has featured in previous budget requests is highlighted in the Budget Framework paper that is currently being scrutinized by Parliament.
Appearing before the Finance Committee on Wednesday chaired by Rubanda East MP Henry Musasizi, the Minister of State for Finance David Bahati was questioned about the continuous recapitalization of the Bank.
Bahati requested that Bank of Uganda officials provide a comprehensive statement on Thursday prompting the Committee Chairperson to direct that Governor Mutebile appears to give an explanation.
Finance Ministry also plans to capitalize Uganda Development Bank (UDB), African Development Bank (ADB), Trade and Development Bank (TDB) and Islamic Development Bank (IDB) with 120.02 billion Shillings in the coming financial year. In addition to these, Bahati said that his ministry will need an additional budget of 15 billion Shillings to capitalize both Postbank and Housing Finance bank.
Budadiri West MP Nathan Nandala Mafabi queried the continued capitalization of the Central Bank specifically that is becoming an annual exercise.
“You are continuously capitalizing Bank of Uganda. What is happening?” asked Mafabi.
Pian County MP Ahia Remigio Achia questioned the proposed recapitalization of the Bank even when inflation has been stable.
In April 2019, the Ministry of Finance sought parliament’s approval of Shillings 620.7 billion to recapitalize the Central Bank (484.2 billion) and other five banks including Uganda Development Bank- UDB (103 billion), Housing Finance Bank (30 billion), Post Bank (4.7 billion), Trade and Development Bank (2.5 billion) and African Development Bank- ADB (1 billion). Lawrence Ssemakula, the Accountant General then said that the Central Bank had suffered deficits since June 2013 and urgently needed money to avert an impending crisis.
Besides the 2019 capitalization request, parliament in May 2016 also approved Shillings 240 billion to recapitalize BOU in two phases.
Government was then to inject Shillings 150 billion in BOU in the 2016/2017 financial year and another Shillings 90 billion in the following financial year 2017/2018. The approval followed an explanation from the Finance Ministry that the Bank had only Shillings 860 billion, which made it difficult to conduct monetary operations.
Section 14 (2) of the Bank of Uganda Act 2000 states that the authorized capital of Bank of Uganda may be increased by a resolution of parliament to ensure adequate operations of the bank.
In his 2018/2019 financial year audit report, Auditor General John Muwanga queried the under-capitalization of Bank of Uganda to a tune of 671.71 billion.
He noted that as per Section 14 (3) of the Central bank Act, the issued and paid-up capital of the Bank shall be a minimum of Shillings 2 trillion.
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