Government has allocated 627 Billion Shillings to capitalize seven banks.
The banks include Uganda Development Bank (UDB) with 103 billion, Housing Finance Bank 30 billion, Post Bank 4.7 billion, International Development Bank 2 billion, Trade Development Bank 2.5 billion and Africa Development Bank (ADB) 1 billion.
The money is part of the 39.5 trillion proposed National Budget in the coming financial year 2019/2020.
For BoU, Ministry of Finance officials told MPs on Finance Committee yesterday that Shs484.2b is urgently needed to cover for deficits and losses accumulated since 2013.
This was revealed by Mr Lawrence Ssemakula, the Accountant General in the Ministry of Finance while appearing before the House Committee on Finance to present a ministerial policy statement on Treasury operations.
Mr Ssemakula told the committee chaired by Rubanda East MP Henry Musasizi (NRM) that the Central Bank had indicated to the Ministry that it had suffered deficits since June 2013 and that the money was needed to avert an impending crisis.
“They [BoU] have indicated that they have been impaired from June 2013. So as per the BoU Act, we have no option but to allocate the money in our budget since their operations are in deficits,” Mr Ssemakula said.
The Central Bank was last recapitalized in the financial year 2016/2017 with 150 billion shillings and another 90 billion shillings in 2017/2018.
Government’s request to recapitalize the Bank in May last year was rejected by MPs after the Finance Ministry reported that the Central Bank had then incurred deficits and losses to a tune of 474 billion shillings warning of an economic crisis if nothing is done.
Parliament’s Budget Committee rejected the request and Parliament agreed with MPs accusing Finance Ministry of stampeding parliament also arguing that the losses incurred by the Central Bank had not been fully explained. Parliament also rejected the request saying that it had come at the end of the budgeting process.
According to the ministerial statement for the 2018/2019 Financial Year (FY), Shs484.2b capitalisation fund for BoU is expected to increase the budgetary allocation towards payment of domestic debt from Shs2.3 trillion in 2018/19 FY to Shs3.2 trillion in 2019/20 FY.
The Shs3.2 trillion domestic debt budget includes Shs62b for Contingency Fund, Shs140b for court awards arrears, Shs510b for treasury bills interest, Shs2.04 trillion for treasury bonds costs, Shs1.2b for listing fees and Shs750m for bank charges.
The latest BoU request for capitalisation first came to the attention of Parliament in May last year with a request for Shs474b.
Government has in the previous financial years recapitalized UDB with the intention of giving low-interest loans to manufacturers and those in the Agriculture sector.
President Yoweri Museveni said that the move to invest an additional 500 billion Shillings over a period of time is to speed up government efforts to modernize agriculture and increase the manufacturing of goods made in Uganda.
Meanwhile, a move to recapitalize Housing Finance Bank in the current financial year 2018/2019 with 30 billion was deferred by Parliament directing a performance audit on the Bank’s account before a decision to invest money in the financial institution is made.
The bank whose portfolio mainly consists of mortgage banking became a commercial bank in 2008 and is co-owned by the National Social Security Fund (NSSF), National Housing and Construction Company (NHCC) and the Government of Uganda.
