KAMPALA – A section of MPs has protested what they call chronic capitalization of the Central Bank saying the move is crippling funding in crucial sectors of the economy.
The division was captured in the minority report on the 2020/2021 National Budget Framework Paper authored by Muwanga Kivumbi (Butambala County) and Cecilia Ogwal (Dokolo Woman MP) who raised queries on the recapitalization of Bank of Uganda.
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.
As of FY2019/2020, the government has recapitalized Bank of Uganda to the tune of Shs 1.160.2Trn with Parliament having approved another proposal to recapitalise the Central Bank to a tune of Shs 481.7b in the FY2020/2021, which brought the total amount for recapitalization of Bank of Uganda to Shs 1.641Trn.
According to documents tabled before the Committee, in 2012/2013 Government injected Shs410.02Bn, followed by Shs250b in 2014/2015, later in 2015/2016 Bank of Uganda received another capital injection of Shs200b.
In 2016/2017, the Central Bank was recapitalized to a tune of Shs100Bn, while in 2019/2020 the Bank received capital injection of Shs200b and in 2020/202l the Bank is seeking for Shs487.70b.
Bank of Uganda informed the Committee of Budget, that as at June 2019, BoU capital was impaired to the tune of Shs 681.712 billion and that in October 2019, BoU was partly recapitalized with securities worth Shs200b, leaving a deficit of Shs481.712b 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, the drawdown of the General Reserve Fund, deposit auctions and Repurchase agreements.