Appearing before the Finance Committee on Wednesday chaired by Rubanda East MP Henry Musasizi, the Minister of State for Finance David Bahati was questioned about the continuous recapitalization of the Bank.
Parliament’s Finance Committee has summoned the Bank of Uganda
Governor Emmanuel Tumusiime Mutebile to explain the continued recapitalization
of the institution.
This follows a fresh request by the Ministry of Finance to recapitalize the Central
Bank with Shillings 481.7 billion Shillings in the coming financial year
2020/2021. The proposal which has featured in previous budget requests is
highlighted in the Budget Framework paper that is currently being scrutinized
Appearing before the Finance Committee on Wednesday chaired by Rubanda East MP
Henry Musasizi, the Minister of State for Finance David Bahati was questioned
about the continuous recapitalization of the Bank.
Bahati requested that Bank of Uganda officials provide a comprehensive
statement on Thursday prompting the Committee Chairperson to direct that
Governor Mutebile appears to give an explanation.
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Finance Ministry also plans to capitalize Uganda Development Bank (UDB),
African Development Bank (ADB), Trade and Development Bank (TDB) and Islamic
Development Bank (IDB) with 120.02 billion Shillings in the coming financial
year. In addition to these, Bahati said that his ministry will need an
additional budget of 15 billion Shillings to capitalize both Postbank and
Housing Finance bank.
Budadiri West MP Nathan Nandala Mafabi queried the continued capitalization of
the Central Bank specifically that is becoming an annual exercise.
“You are continuously capitalizing Bank of Uganda. What is
happening?” asked Mafabi.
Pian County MP Ahia Remigio Achia questioned the proposed recapitalization of
the Bank even when inflation has been stable.
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In April 2019, the Ministry of Finance sought parliament’s approval of
620.7 billion Shillings to recapitalize the Central Bank (484.2 billion Shillings) and
other five banks including Uganda Development Bank- UDB (103 billion Shillings), Housing
Finance Bank (30 billion Shillings), Post Bank (4.7 billion Shillings), Trade and Development Bank
(2.5 billion Shillings) and African Development Bank- ADB (1 billion Shillings).
Ssemakula, the Accountant General then said that the Central Bank had suffered
deficits since June 2013 and urgently needed money to avert an impending
Besides the 2019 capitalization request, parliament in May 2016 also approved
Shillings 240 billion to recapitalize BOU in two phases.
Government was then to inject 150 billion Shillings in BOU in the 2016/2017
financial year and another 90 billion Shillings in the following financial year
2017/2018. The approval followed an explanation from the Finance Ministry that
the Bank had only 860 billion Shillings, which made it difficult to conduct
Section 14 (2) of the Bank of Uganda Act 2000 states that the authorized
capital of Bank of Uganda may be increased by a resolution of parliament to
ensure adequate operations of the bank.
In his 2018/2019 financial year audit report, Auditor General John Muwanga
queried the under-capitalization of Bank of Uganda to a tune of 671.71 billion. He noted that as per Section 14 (3) of the Central bank Act, the issued and
paid-up capital of the Bank shall be a minimum of Shillings 2 trillion.