Bank of Uganda, the regulator of the banking sector in the country is set for tough times ahead following the refusal by MPs to approve the Shs484.2bn the Central Bank had requested for recapitalization.
The MPs instead reduced the figure to Shs200bn on grounds that the figure wasn’t justified and asked to have the funds reallocated to other sectors.
Presenting report on the ministerial policy statement for the Ministry of Finance today, Henry Musasizi, Chairperson Parliamentary Finance Committee informed Parliament that in 2016/2017, BoU was capitaiized with Shs100bn and therefore the Shs484bn recapitalization request was a shocker.
He described it as ambiguous.
“Whereas the bank needs to be capitalized from time to time to maintain a sound capital base, the Committee found an increase from Shs100bn to Shs484.21bn representing an increment of 384% in a period of 2 years unjustified. The Committee noted the need for gradual and consistent increments in budget allocations for capitalization of the bank,” Musasizi said.
He asked Parliament to uphold the Committee’s recommendation to have the Shs284.21bn be reallocated from Treasury Operations to other priority sectors to meet the funding as will be identified by the House.
It should be recalled that in the 2017/2018 annual report by the Bank of Uganda, it was revealed that the Central Bank was undercapitalized to a tune of Shs468.86bn with the report highlighting that as per the Bank of Uganda Act section 14(3), the issued and paid-up capital of the Bank shall be a minimum of Shs20,000Trn but as at June 30th 2018, the core capital of the Central Bank was below minimum required capital by Shs468.86bn.
There was a request to recapitalise the Central Plans by Government to a tune of Shs500bn but the request was rejected after MPs threw out the proposal warning Ministry of Finance against cutting deals with tax payers’ monies.
David Bahati, State Minister for Planning took to the floor to table the addendum to corrigenda to the draft budget estimates for treasury operations FY 2018/2019 in May 2018 but Parliament rejected the corrigenda, after Amos Lugoloobi, Chairperson Budget Committee protested the tabling of the corrigenda saying it would distort budget process.
Headed by Prof. Emmanuel Tumusiime-Mutebile as Governor, BoU has in recent years had credibility issues after it emerged that the Central Bank has in the past fraudulently and controversially closed and sold off some banks.