The parliamentary Budget Committee has foiled a scam in which the taxpayer stood to lose at least Shs481 billion in the alleged recapitalization of Bank of Uganda (BOU).
The money was discovered during an interaction between the Ministry of Finance and the Budget Committee to scrutinize the Financial Year 2021/22 budget framework paper.
While appearing before the Budget Committee of parliament on Wednesday. BoU’s Deputy Governor Michael Atingi-Ego said the Central Bank does not need recapitalization in the 2021/2022 financial year.
Atingi-Ego was appearing on the request of the committee to clarify on the Shs 481 billion request in the Budget Framework Paper for the 2021/2022 financial year towards the recapitalization of BoU for the second consecutive year.
During the budgeting cycle for the 2021/2022 financial year, the Finance Committee approved a request of Shs 481 billion to recapitalize the Central Bank.
This request triggered suspicion among legislators with the committee chairperson, Henry Musasizi, saying it could be a plot by the government to siphon funds under the guise of recapitalizing the Central Bank.
Musasizi disclosed his suspicion during an interface between the Budget Committee, Finance Ministry and National Planning Authority led by the Finance Minister, Matia Kasaija on Monday, 25th January 2021, over the budget estimates for the next financial year.
Musasizi explained that recapitalizing BoU would not be done through appropriation of cash from the Consolidated Fund but rather from the securities issued by the treasury. Approached with a fresh recapitalization request, MPs questioned whether the Finance Ministry was using the item of recapitalization to fund items hidden from parliament’s scrutiny.
Asked for an explanation on Monday, Kasaija said 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, MPs were shocked when the BOU Deputy Governor, Dr. Michael Atingi-Ego told legislators 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,” said Atingi-Ego.
He recounted an incident in the 2018/2019 financial year when the capital of Bank of Uganda was impaired by Shs 481 billion and a request was made to the Ministry of Finance for recapitalization, which was approved in July 2020.
Atingi-Ego told the Budget Committee that the accounts of Bank of Uganda were audited in the just-ended financial year and the Central Bank had made a modest profit of Shs 40 billion. He noted that with this profit, the Bank of Uganda is not requesting for any recapitalization because the capital is not impaired.
Government is seeking Shs 45.6 trillion for the new Financial Year.