Parliament okays Shs150b to recapitalise Central Bank
Members of Parliament on Tuesday evening approved the recapitalisation of Bank of Uganda by Shs150 billion following a recommendation by the Finance, planning and economic development committee.
The recommendation is, however, Shs50b less than the amount the Ministry of Finance Planning and Economic Development had requested for the committee to approve.
“The committee sought the justification for the Shs200b recapitalisation of Bank of Uganda but received no scientific explanation as to how the Shs200b has been arrived at,” the committee report reads.
The committee used its assessment of the current deficit at BoU to grant it Shs150b. By the end of March 2015, the committee observed that BoU was making income of Shs104b but had an expenditure of Shs248b, leaving a deficit of Shs144b.
In the 2015/16 Ministerial Policy Statement for ministry of Finance Planning and Economic Development, the ministry had requested BoU get Shs200b as a result of a fall in income from foreign financial investments that took a hit from the slowing global economy that can be traced as far back as 2008. Additionally, the recent Shilling depreciation would increase BoU’s inability to manage the country’s monetary policy.
The committee, however, rejected the currency depreciation reasoning, noting that the Shilling had stabilised and the government had other priorities.
The Shilling remains weak against the dollar, with analysts and bankers saying it could close the year at Shs3,200. The committee recommended that the Shs50b balance initially meant for BoU should instead be taken on by Uganda Revenue Authority to address the funding gap at to enable enhance revenue collections. Additionally, newly created institutions, Financial Intelligence Authority and the Free Zones Authority have been fully funded in the Budget by Shs4b and Shs4.04b.