KAMPALA – Bank of Uganda is undercapitalised to a tune of UGX671.712bn, a situation Auditor General, John Muwanga says poses a great risk to the operations of the Central Bank.
The details of the Central Bank’s woes are contained in the 2018/2019 audit report of Bank of Uganda which carries queries raised by the Auditor General team.
The audit report highlighted 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 UGX2Trillion but as at June 30, 2019, the core capital of the bank was below the minimum required capital by UGX671.712bn while in the same period in 2018, the Central Bank was undercapitalized to a tune of UGX482.730bn.
The audit report further explained that the operating losses of the bank during the year ended June 30, 2019 were mainly attributable to interest expense paid to financial institutions on deposit auctions and vertical repos issued by the bank in the management of monetary policy as per the bank’s mandate and currency costs of UGX 198.274bn which is equivalent to 89 % of the interest income) yet in 2018 the loss was recorded at UGX 155Bn representing 79% of the interest income.
The Central Bank management explained that the costs of implementation of monetary policy that have caused erosion of the bank’s core capital are currently fully borne by the bank.
Muwanga warned, “I considered this to be a key audit matter because inadequate capital poses a business risk to the bank and its operations. I performed the following audit procedures in this area, among others.”
The bank also reported that during the period July 2018 to June 2019, the Non-Executive Directors were each paid UGX.5M net of tax per month as retainer fees and UGX2.5m net of tax per meeting as sitting allowance.
The Central Bank’s board comprises of Prof. Emmanuel Tumusiime-Mutebile who doubles as both the Chairman of the Board and Governor, Dr. Louis Kasekende, James Kahoza, William Kalema, Judy Obitre Gama, Keith Muhakanizi and Josephine Okui Ossiya.