MPs on Parliament’s finance committee have questioned another planned recapitalization of Bank of Uganda (BOU) with sh480b.
The MPs raised the matter yesterday during a meeting in which the finance ministry officials led by David Bahati, the Finance state minister, were explaining their ministry’s plans for the financial year 2020/2021 budget.
The committee chairperson, Henry Musasizi, asked the ministry to explain why they have continued to plan for the capitalization of BOU yet the bank has been significantly capitalized in recent years.
The finance ministry’s director for budget, Kenneth Mugambe, said:
“The capitalization of Bank of Uganda is meant to increase its capital vase to enable it to undertake its operations and manage monetary policy.”
The central bank has on several occasions been in the spotlight over continuous requests for recapitalization. Last year, it emerged that most of the requests emanated from the deficits the bank has recorded for over seven years.
The accountant general, Lawrence Ssemakula, told the finance committee that the sh620.7b requested presented last year, was because the bank had suffered deficits since June 2013 and that the money was needed to prevent a crisis.
“So, as per the BoU Act, we have no option but to allocate the money in our budget since their [BOU] operations are in deficits,” Ssemakula stated.
Yesterday, Pian County MP Remigio Achia, who is a finance expert, said:
“We have been questioning the capitalization of the Bank of Uganda. There is no justification for capitalizing it when inflation is stable and our reserves have been good.”
In the 2015/2016 national budget, Parliament approved a request from the Government to capitalize BOU with sh860b.
In the following financial year of 2016/2017, another sh250b was approved by Parliament.