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.
The Accountant General, Lawrence Ssemakula told Parliament’s Finance Committee on Wednesday that part of the 627.2 billion, 484.2 billion will be allocated to capitalize Bank of Uganda (BOU).
The Central Bank was last recapitalized in the financial year 2016/2017 with 150 billion shillings and another 90 billion shillings in 2017/2018.
Asked by the Committee Chairperson Henry Musasizi why the Central Bank needed to be recapitalized, Ssemakula explained that the Bank has been impaired since June 2017 and that by June 2018, it has been reduced by 448 billion shillings.
Ssemakula further justified the capitalization saying that the Central Bank’s operations are currently in deficits.
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.
MPs Anthony Okello representing Kioga County and Kachumbala County MP Patrick Isiagi Opolot raised more questions on the planned recapitalization of Banks without the Finance Ministry availing the committee reasons for capitalization and accountability for previous money injected in the Banks.
The Director Bank Kenneth Mugambe asked the committee for time to avail a written document on the matter.
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.