A section of MPs have protested what they call chronic capitalization of Bank of Uganda (BoU), arguing that the practice is greatly affecting funding in crucial sectors of the economy.
This is contained in the minority report on the 2020/2021 FY National Budget Framework Paper authored by Butambala County MP, Muwanga Kivumbi and Dokolo Woman MP, Cecilia Ogwal, who raised queries on the recapitalization of Bank of Uganda.
It is should be noted that as of 2019/2020 FY, Government has recapitalized Bank of Uganda to the tune of Shs1.160.2Trn with Parliament having approved another proposal to recapitalize the Central Bank to a tune of Shs481.7bn in 2020/2021 FY, which has brought the total amount for recapitalization of Bank of Uganda to Shs1.641Trn.
According to documents tabled before the Committee, in 2012/2013 Government injected Shs410.02bn, followed by Shs250bn in 2014/2015 and in 2015/2016, BoU received another capital injection of Shs200Bn.
In 2016/2017, the Central Bank was recapitalized with Shs100bn, while in 2019/2020, the Bank received capital injection of Shs200bn.
The duo noted that Government is authorized under Section 14(4) of the Bank of Uganda Act (2000) and Section 36 of the Public Finance and Management Act 20l5 as amended to issue securities for recapitalization of the Bank of Uganda where the capital of the Bank is impaired.
Bank of Uganda informed Parliament’s Budget Committee that as at June 2019, BoU capital was impaired to the tune of Shs681.7bn and that in October 2019, BoU was partly recapitalized with securities worth Shs200bn, leaving a deficit of Shs481.7bn which is required in FY2020/2021.
Although the majority of the Committee members agreed to recapitalize the Central Bank again, the opinion was protested by MPs Muwanga and Ogwal who argued in their report, “This chronic continuous recapitalization of the Bank of Uganda is denying valuable resources for critical government programmes like Health, Education, and Industrialization.”
The two made several recommendations including calling on the Central Bank to utilize savings on Government accounts, draw down of the General reserve Fund, deposit auctions and Repurchase agreements.