Government appeared to be reading from two different pages when Bank of Uganda, Deputu Governor Micheal Atingi-Ego appeared before Parliament yesterday, saying the Central Bank does not need recapitalization in the 2021/2022 financial, yet Shs481 billion had been requested for same purpose in next financial year’s budget framework paper.
During the budgeting cycle for the 2020/2021 financial year, the Finance Committee of Parliament approved a request of Shillings 481 billion to recapitalize the Central Bank and the same figure appeared for the 2021/2022 financial year.
While meeting the Finance Minister Matia Kasaija and the National Planning Committee on Monday, MPs on the Finance Committee asked whether the Finance Ministry was using the item of recapitalization to fund items hidden from Parliament’s scrutiny.
Kasaija told Parliament that just like any other bank, the Central Bank is required to maintain capital holding above a certain threshold and therefore the government couldn’t risk allowing BoU to fall below the threshold.
However, when the BoU Deputy Governor, Atingi-Ego appeared before Parliament on Wednesday, he told MPs that the capital of the bank is not impaired and therefore no need for recapitalization.
“The procedure for recapitalization is that once the audited accounts for any financial year have been finalized, then the level of capital is determined… whether the capital is impaired or not. Should the capital be impaired, then it is only at such a point when Bank of Uganda requests the Ministry of Finance to present to parliament a request for recapitalization,” he said.
He told the committee that in the 2018/2019 financial year, the capital of the Central Bank was impaired by Shs481 billion and a request was made to the Ministry of Finance for recapitalization, which was approved in July 2020.
Atingi-Ego told the Committee that BoU’s books of accounts were audited in the just-ended financial year and the Central Bank had made a profit of Shs40 billion. On that basis, he noted that the Bank is not requesting for any recapitalization because the capital is not impaired.