Parliament Suspicious Of Continuous BoU Recapitalization

The chairperson of Finance Committee of Parliament Hon. Henry Musasizi is suspicious that the government could be siphoning funds meant for the recapitalization of the Central Bank.

He disclosed his suspicions during a meeting between legislators on the Budget Committee, officials from the Ministry of Finance and the National Planning Authority led by Finance Minister, Matia Kasaija over the budget estimates for the next financial year.

While scrutinizing the Budget Framework Paper for the 2021/2022 financial year, MPs queried the allocation of another Shillings 481 billion towards the recapitalization of Bank of Uganda (BoU) for the second consecutive year.

During the last budgeting cycle, the Finance Committee approved a request to recapitalize BoU with Shillings 481 billion in the 2020/2021 financial year. The committee chairperson Henry Musasizi explained that in January last year, recapitalizing BoU would not be done through the appropriation of cash from the Consolidated Fund but rather from the securities issued by the treasury.

Musasizi is now querying the request for another Shilling 481 billion in the next financial year, saying the figure is also projected in the subsequent financial year. He wonders whether the recapitalization is now a recurrent expenditure and wonders whether the ministry is using the item of recapitalization to fund items hidden from parliament’s scrutiny.

The vice-chairperson of the Budget Committee, Patrick Isiagi asked the minister to provide an explanation to the MPs on the continuous request for the recapitalization of the Central Bank.

In his response, the minister noted that just like any 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.

Isiagi said the ministry has not provided any study or analysis to justify why the Bank needs the exact amount of money it received last year. He challenged the minister to produce models to justify the allocation.

Kasaija told the MPs he was summoning an officer from Bank of Uganda to appear before the MPs and provide answers to their queries. However, by the time the committee adjourned for the day, the officer had not arrived.