By Andrew Irumba
Government of Uganda has run to Parliament seeking approval of Shs620.7 billion for the planned recapitalization of Bank of Uganda (BoU) and other five banks, Spy Uganda has learnt.
For BoU, Ministry of Finance officials told MPs on Finance Committee Wednesday that Shs484.2b is urgently needed to cover for deficits and losses accumulated since 2013!
This was revealed by Mr Lawrence Ssemakula, the Accountant General in the Ministry of Finance while appearing before the House Committee on Finance to present a ministerial policy statement on Treasury operations.
Mr Ssemakula told the committee chaired by Rubanda East MP Henry Musasizi (NRM) that the Central Bank had indicated to the Ministry that it had suffered deficits since June 2013 and that the money was needed to avert an impending crisis.
“They (BoU) have indicated that they have been impaired from June 2013. So as per the BoU Act, we have no option but to allocate the money in our budget since their operations are in deficits,” Mr Ssemakula said.
When MPs asked whether the ministry had done due diligence on the request by the Central Bank managers, Mr Ssemakula said the deficits are captured in the Auditor General’s reports.
According to the ministerial statement for the 2018/2019 Financial Year (FY), Shs484.2b capitalisation fund for BoU is expected to increase the budgetary allocation towards payment of domestic debt from Shs2.3 trillion in 2018/19 FY to Shs3.2 trillion in 2019/20 FY.
The Shs3.2 trillion domestic debt budget includes Shs62b for Contingency Fund, Shs140b for court awards arrears, Shs510b for treasury bills interest, Shs2.04 trillion for treasury bonds costs, Shs1.2b for listing fees and Shs750m for bank charges.
The latest BoU request for capitalisation first came to the attention of Parliament in May last year with a request for Shs474b.
Mr Muhakanizi had previously written to the Clerk of Parliament, explaining that BoU had registered a deficit of Shs17b and talked of operating losses of Shs457b on account of “monetary policy” and “currency costs”.
“This projected deficit in the core capital position, together with the required core capital position of Shs30b, puts the additional recapitalization securities to the tune of Shs504b,” Mr Muhakanizi’s letter reads in part.
Although BoU and ministry of finance officials had warned of an impending economic crisis, MPs on the budget committee rejected the request because it had come at the tail end of the budgeting process and members needed time to scrutinize the request.
The MPs last year accused the Finance ministry of “stampeding Parliament” and insisted that the losses at BoU were not fully explained, and that the request recapitalization came at the end of the budgeting process.
Some committee members, however, called for an investigation into the cause of losses and deficits at BoU before injecting the tax payers’ money in the bank.
The State Minister for Microfinance, Mr Haruna Kasolo, revealed that government plans to spend Shs141.2b on five other banks.
The Director Budget, Mr Keneth Mugambe, told the MPs that the banks to be capitalized included Uganda Development Bank, Post Bank, Housing Finance, Trade and Development Bank, and African Development Bank.
Parliament is expected to vote on the government request for capitalization of Bank of Uganda and other banks.
How Shs620.7B Will be Distributed
Bank of Uganda – Shs484.2b
Uganda Development Bank -Shs103b
Housing Finance Bank -Shs30b
Post Bank -Shs4.7b
Trade and Development Bank -Shs2.5b
African Development Bank -Shs1b