Capital of Uganda’s Central Bank, Bank of Uganda has been eroded over time mainly due to operating losses, according to the Auditor General John Muwanga.
As of 30th June 2012, according to the Auditor General’s report, BOU’s capital excluding translation reserves was a deficit of 226 million shillings compared to 116 billion it had in 2011.
The report states that the capital is impaired and requires redemption from government in accordance with section 14 of Bank of Uganda Act.
Muwanga in his report noted that correspondences between BOU and the Ministry of Finance indicated that the capital adequacy issues are currently under discussions but no formal plan has been agreed yet.
He concludes that the bank may not be able to effectively execute its functions as envisaged in the Constitution and Bank of Uganda Act.
The central bank management explained that the Bank has developed a recapitalization plan which was forwarded to the Ministry of Finance for consideration and that discussions were on-going with the Ministry to recapitalize the Bank in accordance with Section 14(4) of BOU Act.
The AG recommended that the management should expedite the current discussions with the Ministry and ensure it is recapitalized.
The Permanent Secretary Ministry of Finance Keith Muhakanizi says in their operations they do make losses, but the Bank of Uganda Act provides for recapitalization of the treasury by government.
However, he could not state by how much the Bank was recapitalized.
According to Section 14 sub-section one of the Bank of Uganda Act 2000, the authorised capital of the bank shall be thirty billion shillings which shall be subscribed by the Government from time to time.
The Act further states in sub-section two that the authorised capital may be increased by a resolution of Parliament to ensure adequacy to the operations of the bank. The issued and paid-up capital of the bank shall be a minimum of twenty billion shillings.
Sub-section four states that where the capital of the bank is impaired at any particular time, the Government will furnish securities to the bank to make good the impairment.
The Auditor General’s report comes a midst reports of delayed salaries for civil servants in the country.
Several government employees including teachers and police have been affected by the salary delays. Recently, police embarked on the countrywide distribution of food rations to help affected officers to cope up with the salary delay.