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Kampala, Uganda | THE INDEPENDENT | Parliament has rejected a proposal by the government to allocate sh484.2 billion to recapitalize the Bank of Uganda (BOU) , reducing it to sh200 billion.
The changes were made on Friday as Parliament adopted the report by parliament’s Finance Committee on the Finance Sector Ministerial Policy Statement for the next financial year.
The coming financial year 2019/2020, government also plans to capitalize Uganda Development Bank (UDB) with 103 billion, Housing Finance Bank 30 billion, Post Bank 4.7 billion, International Development Bank 2 billion, Trade Development Bank 2.5 billion and Africa Development Bank (ADB) 1 billion.
Rubanda East MP Henry Musasizi presented the report to the plenary session Chaired by Deputy Speaker Jacob Oulanyah.
Early this month, the Accountant General, Lawrence Ssemakula told Parliament’s Finance Committee that part of the 39.5 trillion shillings proposed National Budget for the coming next financial year, 484.2 billion shillings was to capitalize the Central Bank.
Ssemakula explained that the Bank had been impaired since June 2017 and that by June 2018, it had been reduced by Shillings 448 billion. Ssemakula said that the Central Bank’s operations are currently in deficits.
However, in his committee report to Parliament, Musasizi noted that the Bank had been last capitalized in the financial year 2016/2017 with 100 billion shillings and that whereas it needs to be capitalized from time to time to maintain a sound capital base, his committee found the increase from 100 billion shillings to 484.2 billion in a period of 2 years is unjustified.
He recommended that only 200 billion shillings is approved for BOU capitalization and the remaining 284.2 billion reallocated from Treasury Operations to other priority sectors to meet the funding as will be identified by Parliament.
He noted the need for gradual and consistent increments in budget allocations for capitalization of the bank.
Kumi Municipality MP, Silas Aogon supported the committee recommendation saying that the capitalization of BOU should be put at 100 billion shillings per financial year.
Deputy Speaker Jacob Oulanyah asked the MPs whether capitalization is done on an annual basis.
Musasizi responded saying that capitalization is done as the need arises and with his response, Oulanyah put a question and MPs approved the capitalization of Shillings 200 billion opposed to the planned government figure of Shillings 484.2 billion.
Government’s request to recapitalize the Bank in May last year was rejected by MPs after the Finance Ministry reported that the Central Bank had then incurred deficits and losses to a tune of 474 billion shillings warning of an economic crisis if nothing is done.
Parliament’s Budget Committee then rejected the request and Parliament agreed with MPs accusing Finance Ministry of stampeding parliament also arguing that the losses incurred by the Central Bank had not been fully explained. Parliament also rejected the request saying that it had come at the end of the budgeting process.
